x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 29, 2018 OR |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______ |
Delaware | 13-3912933 | |
(state or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) |
Title of each class | Name of each Exchange on which Registered | |
Carter's, Inc.'s common stock par value $0.01 per share | New York Stock Exchange |
Page | |||
Form 10-K Summary | |||
• | providing the best value and experience in young children's apparel and accessories; |
• | extending the reach of our brands by improving the convenience of shopping for our products, and our omni-channel experience, as well as expanding our international operations; |
• | improving profitability by strengthening distribution and direct-sourcing capabilities, as well as pricing and inventory management disciplines; and |
• | investing in new sources of growth. |
• | Carter’s stand-alone stores, which carry an extensive assortment of Carter’s baby and young children’s apparel, accessories, and gift items, and average approximately 4,200 square feet per location. |
• | OshKosh stand-alone stores, which carry a wide assortment of OshKosh young children’s apparel, accessories, and gift items, and average approximately 4,600 square feet per location. |
• | Dual-branded stores, which include: |
• | “Co-branded” locations, which consist of single retail stores that offer products from our Carter’s and Oshkosh brands, and average approximately 5,000 square feet per location; and |
• | “Side-by-side” locations, which consist of adjacent retail stores for our Carter’s and OshKosh brands that are connected, and average approximately 7,300 square feet per location. |
• | financial instability, including bankruptcy or insolvency, of one or more of our major vendors; |
• | the imposition of new regulations relating to imports, duties, taxes, and other charges on imports, including those that the U.S. government has and may implement on imports from China; |
• | increased costs of raw materials (including cotton and other commodities), labor, fuel, and transportation; |
• | political instability or other global events resulting in the disruption of trade in foreign countries from which we source our products; |
• | interruptions in the supply of raw materials, including cotton, fabric, and trim items; |
• | increases in the cost of labor in our sourcing locations; |
• | the occurrence of a natural disaster, unusual weather conditions, or a disease epidemic in foreign countries from which we source our products; |
• | changes in the U.S. customs procedures concerning the importation of apparel products; |
• | unforeseen delays in customs clearance of any goods; |
• | disruptions in the global transportation network, such as a port strike, work stoppages or other labor unrest, capacity withholding, world trade restrictions, acts of terrorism, or war; |
• | the application of adverse foreign intellectual property laws; |
• | the ability of our vendors to secure sufficient credit to finance the manufacturing process, including the acquisition of raw materials; |
• | potential social compliance concerns resulting from our use of international vendors, independent manufacturers, and licensees, over whom we have limited control; |
• | manufacturing delays or unexpected demand for products may require the use of faster, but more expensive, transportation methods, such as air-freight services; |
• | the use of “conflict minerals” sourced from the Democratic Republic of the Congo or its surrounding countries in our products; and |
• | other events beyond our control that could interrupt our supply chain and delay receipt of our products into the United States. |
• | the failure of the computer systems, including those of third-party vendors, that operate our eCommerce sites including, among others, inadequate system capacity, computer viruses, human error, changes in programming, security breaches, system upgrades or migration of these services to new systems; |
• | disruptions in telecom services or power outages; |
• | reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers on-time and without damage; |
• | rapid technology changes; |
• | the failure to deliver products to customers on-time and within customers’ expectations; |
• | credit or debit card fraud; |
• | the diversion of sales from our physical stores; |
• | natural disasters or adverse weather conditions; |
• | changes in applicable federal, state and international regulations; |
• | liability for online content; and |
• | consumer privacy concerns and regulation. |
Period | Total number of shares purchased(*) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of remaining shares that can be purchased under the plans or programs | ||||||||||
September 30, 2018 through October 27, 2018 | 257,460 | $ | 97.07 | 257,460 | $ | 415,155,995 | ||||||||
October 28, 2018 through November 24, 2018 | 90,182 | $ | 93.30 | 89,296 | $ | 406,824,924 | ||||||||
November 25, 2018 through December 29, 2018 | 168,353 | $ | 84.42 | 168,353 | $ | 392,612,940 | ||||||||
Total | 515,995 | 515,109 |
(*) | Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards. There were 886 shares surrendered between October 28, 2018 and December 29, 2018. |
Fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Number of shares repurchased | 1,879,529 | 2,103,401 | 3,049,381 | ||||||||
Aggregate cost of shares repurchased (dollars in thousands) | $ | 193,028 | $ | 188,762 | $ | 300,445 | |||||
Average price per share | $ | 102.70 | $ | 89.74 | $ | 98.53 |
For the fiscal year ended | ||||||||||||||||||||
(dollars in thousands, except per share data) | December 29, 2018 | December 30, 2017 (4) | December 31, 2016 (4) | January 2, 2016 | January 3, 2015 | |||||||||||||||
Operating Data: | ||||||||||||||||||||
U.S. Retail | $ | 1,851,193 | $ | 1,775,378 | $ | 1,655,784 | $ | 1,514,355 | $ | 1,422,305 | ||||||||||
U.S. Wholesale | 1,180,687 | 1,209,663 | 1,178,034 | 1,173,313 | 1,155,089 | |||||||||||||||
International | 430,389 | 415,463 | 364,725 | 326,211 | 316,474 | |||||||||||||||
Total net sales | $ | 3,462,269 | $ | 3,400,504 | $ | 3,198,543 | $ | 3,013,879 | $ | 2,893,868 | ||||||||||
Cost of goods sold | $ | 1,964,786 | $ | 1,917,150 | $ | 1,820,024 | $ | 1,755,855 | $ | 1,709,428 | ||||||||||
Gross profit | $ | 1,497,483 | $ | 1,483,354 | $ | 1,378,519 | $ | 1,258,024 | $ | 1,184,440 | ||||||||||
Operating income | $ | 391,433 | $ | 419,607 | $ | 425,928 | $ | 392,857 | $ | 333,345 | ||||||||||
Income before income taxes | $ | 355,975 | $ | 391,072 | $ | 395,440 | $ | 368,188 | $ | 302,906 | ||||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | $ | 237,822 | $ | 194,670 | ||||||||||
Per Common Share Data: | ||||||||||||||||||||
Basic net income | $ | 6.06 | $ | 6.31 | $ | 5.12 | $ | 4.55 | $ | 3.65 | ||||||||||
Diluted net income | $ | 6.00 | $ | 6.24 | $ | 5.08 | $ | 4.50 | $ | 3.62 | ||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working capital(1)(2)(3) | $ | 715,537 | $ | 689,464 | $ | 779,717 | $ | 867,890 | $ | 792,675 | ||||||||||
Total assets(2)(3) | $ | 2,058,858 | $ | 2,071,042 | $ | 1,949,037 | $ | 2,003,654 | $ | 1,886,825 | ||||||||||
Total debt, net(2) | $ | 593,264 | $ | 617,306 | $ | 580,376 | $ | 578,972 | $ | 579,728 | ||||||||||
Stockholders' equity | $ | 869,433 | $ | 857,416 | $ | 788,363 | $ | 875,051 | $ | 786,684 | ||||||||||
Cash Flow Data: | ||||||||||||||||||||
Net cash provided by operating activities | $ | 356,198 | $ | 329,621 | $ | 369,229 | $ | 307,987 | $ | 282,397 | ||||||||||
Net cash used in investing activities | $ | (63,307 | ) | $ | (227,915 | ) | $ | (88,340 | ) | $ | (103,425 | ) | $ | (104,732 | ) | |||||
Net cash used in financing activities | $ | (298,946 | ) | $ | (223,075 | ) | $ | (363,507 | ) | $ | (162,005 | ) | $ | (122,438 | ) | |||||
Other Data: | ||||||||||||||||||||
Capital expenditures | $ | 63,783 | $ | 69,473 | $ | 88,556 | $ | 103,497 | $ | 103,453 | ||||||||||
Dividend declared and paid per common share | $ | 1.80 | $ | 1.48 | $ | 1.32 | $ | 0.88 | $ | 0.76 |
(1) | Represents total current assets less total current liabilities. |
(2) | All periods have been adjusted to reflect the retrospective adoption of Accounting Standards Update No. 2015-03, Presentation of Debt Issuance Cost for Term Debt. |
(3) | Fiscal 2017 reflects the prospective adoption of Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes. |
(4) | Fiscal 2017 and 2016 reflect the retrospective adoption of Accounting Standards Codification No. 606, Revenue from Contracts with Customers. |
• | providing the best value and experience in young children's apparel and accessories; |
• | extending the reach of our brands by improving the convenience of shopping for our products, and our omni-channel experience, as well as expanding our international operations; |
• | improving profitability by strengthening distribution and direct-sourcing capabilities, as well as inventory management disciplines; and |
• | investing in new sources of growth. |
For the fiscal year ended | ||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||
Net sales | ||||||||
U.S. Retail | 53.5 | % | 52.2 | % | 51.8 | % | ||
U.S. Wholesale | 34.1 | % | 35.6 | % | 36.8 | % | ||
International | 12.4 | % | 12.2 | % | 11.4 | % | ||
Consolidated net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||
Cost of goods sold | 56.7 | % | 56.4 | % | 56.9 | % | ||
Gross profit | 43.3 | % | 43.6 | % | 43.1 | % | ||
Royalty income | 1.1 | % | 1.3 | % | 1.3 | % | ||
Selling, general, and administrative expenses | 33.1 | % | 32.6 | % | 31.1 | % | ||
Operating income | 11.3 | % | 12.3 | % | 13.3 | % | ||
Interest expense | 1.0 | % | 0.9 | % | 0.8 | % | ||
Interest income | n/m | n/m | n/m | |||||
Other (income) expense, net | n/m | 0.1 | % | (0.1 | )% | |||
Income before income taxes | 10.3 | % | 11.5 | % | 12.4 | % | ||
Provision for income taxes | 2.1 | % | 2.6 | % | 4.3 | % | ||
Net income | 8.1 | % | 8.9 | % | 8.1 | % | ||
For the fiscal year ended | |||||||||||||
(dollars in thousands) | December 29, 2018 | % of Total | December 30, 2017 | % of Total | |||||||||
Net sales: | |||||||||||||
U.S. Retail | $ | 1,851,193 | 53.5 | % | $ | 1,775,378 | 52.2 | % | |||||
U.S. Wholesale | 1,180,687 | 34.1 | % | 1,209,663 | 35.6 | % | |||||||
International | 430,389 | 12.4 | % | 415,463 | 12.2 | % | |||||||
Total net sales | $ | 3,462,269 | 100.0 | % | $ | 3,400,504 | 100.0 | % |
Store Count | ||||||
Region: | December 29, 2018 | December 30, 2017 | December 31, 2016 | |||
United States | 844(*) | 830 | 792 |
(*) | Excludes five temporary Skip Hop stores that were closed in January 2019. |
• | Increase of $68.0 million from new stores that are not yet comparable; |
• | Increase of $60.7 million from eCommerce sales; |
• | Decrease of $37.9 million due to the effect of store closings; and |
• | Decrease of $15.8 million in comparable retail store sales. |
Store Count | ||||||
Region: | December 29, 2018 | December 30, 2017 | December 31, 2016 | |||
Canada | 188 | 179 | 164 | |||
Mexico | 42 | 41(2) | N/A(1) |
(1) | We operated retail stores in Mexico upon the acquisition of our former licensee in Mexico on August 1, 2017. |
(2) | Includes 39 retail stores acquired in fiscal 2017. |
• | Increase of $21.2 million related to contributions from acquired businesses; |
• | Increase of $6.7 million from our Canada business, including wholesale and retail operations; |
• | Decrease of $9.0 million from a decrease in sales in China; and |
• | Decrease of $4.0 million from international sales to customers across various regions. |
• | $17.2 million increase primarily related to new store expenses and higher labor costs in Canada; |
• | $14.9 million increase in distribution and freight costs; |
• | $10.9 million increase in expenses due to customer bankruptcies, partially offset by the recovery claims settlement; |
• | $6.5 million increase in expenses related to marketing and brand management; |
• | $3.9 million increase in investments related to information systems; and |
• | $2.6 million increase in employee benefit costs; |
• | $29.6 million decrease in performance based compensation, primarily attributable to provisions for special employee compensation in fiscal 2017. |
(dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Unallocated Corporate Expenses | Consolidated | |||||||||||||||
Operating income for fiscal 2017 | $ | 215,640 | $ | 252,090 | $ | 46,426 | $ | (94,549 | ) | $ | 419,607 | |||||||||
Favorable (unfavorable) change in fiscal 2018: | ||||||||||||||||||||
Gross profit | 32,747 | (19,085 | ) | 363 | 104 | 14,129 | ||||||||||||||
Royalty income | (2,664 | ) | (1,256 | ) | (331 | ) | — | (4,251 | ) | |||||||||||
SG&A expenses | (20,939 | ) | (7,555 | ) | (7,205 | ) | (2,353 | ) | (38,052 | ) | ||||||||||
Operating income for fiscal 2018 | $ | 224,784 | $ | 224,194 | $ | 39,253 | $ | (96,798 | ) | $ | 391,433 |
U.S. Retail | U.S. Wholesale | International | |||||||
Operating margin for fiscal 2017 | 12.1 | % | 20.8 | % | 11.2 | % | |||
Favorable (unfavorable) bps changes in fiscal 2018: | |||||||||
Gross profit | (40) bps | (90) bps | (150) bps | ||||||
Royalty income | (20) bps | — | (10) bps | ||||||
SG&A expenses | 60 bps | (90) bps | (50) bps | ||||||
Operating margin for fiscal 2018 | 12.1 | % | 19.0 | % | 9.1 | % |
• | 40 bps decrease in gross profit due to higher promotional activity and increased eCommerce shipping costs; |
• | 20 bps decrease in royalty income; and |
• | 60 bps decrease in SG&A expenses, primarily due to a/an: |
• | 80 bps decrease in performance based compensation, primarily due to the absence of special employee compensation awarded in fiscal 2017; and |
• | 40 bps increase in distribution expenses. |
• | 90 bps decrease in gross profit due to changes in customer mix, in part due to customer bankruptcies; and |
• | 90 bps increase in SG&A expenses, primarily due to a: |
• | 90 bps increase in provisions for accounts receivable due to customer bankruptcies; |
• | 30 bps increase in distribution and freight expenses; and |
• | 30 bps decrease in performance based compensation, primarily due to the absence of special employee compensation awarded in fiscal 2017. |
• | 150 bps decrease in gross profit due to higher provisions for inventory related to changes in the Company's business model in China and unfavorable sales channel mix; and |
• | 50 bps increase in SG&A expenses, primarily due to a: |
• | 90 bps increase in expenses associated with new retail stores and higher labor costs in Canada; |
• | 40 bps increase in distribution costs; |
• | 30 bps increase in expenses related to marketing and brand management; |
• | 30 bps increase in severance associated with changes to the Company's business model in China; |
• | 110 bps decrease in expenses related to the eCommerce business in Canada and China; and |
• | 30 bps decrease in provisions for accounts receivable. |
For the fiscal year ended | |||||||||||||
(dollars in thousands) | December 30, 2017 | % of Total | December 31, 2016 | % of Total | |||||||||
Net sales: | |||||||||||||
U.S. Retail | $ | 1,775,378 | 52.2 | % | $ | 1,655,784 | 51.8 | % | |||||
U.S. Wholesale | 1,209,663 | 35.6 | % | 1,178,034 | 36.8 | % | |||||||
International | 415,463 | 12.2 | % | 364,725 | 11.4 | % | |||||||
Total net sales | $ | 3,400,504 | 100.0 | % | $ | 3,198,543 | 100.0 | % |
Change from fiscal 2016 to fiscal 2017 | ||||
% Increase (Decrease) | ||||
Retail stores | (3.3)% | |||
eCommerce | +21.6% | |||
Total | +2.7% |
• | on-line purchases can easily be returned in our stores; |
• | our stores increase on-line sales by providing customers opportunities to view, touch and/or try on physical merchandise before ordering on-line; |
• | our in-store customers can order on-line in our stores; and |
• | our customers can order on-line and ship to and pick-up in stores. |
• | Increase of $85.8 million in comparable eCommerce sales, including sales of Skip Hop branded products on our U.S. eCommerce site; |
• | Increase of $81.8 million in sales from new stores that are not yet comparable; |
• | Decrease of $41.7 million in comparable store sales; and |
• | Decrease of $14.4 million due to the effect of store closings. |
• | Increase of $55.7 million from new sales of Skip Hop branded products; and |
• | Decrease of $24.0 million in comparable sales of our other products, which primarily reflected a 2.7% decrease in number of units shipped. |
• | Increase of $31.8 million from sales of Skip Hop branded product to our wholesale customers; |
• | Increase of $15.4 million from the acquisition of Carter's Mexico; |
• | Increase of $15.0 million from our company-operated retail stores in Canada; |
• | Increase of $8.5 million from eCommerce net sales, primarily from our eCommerce sites in Canada and China; and |
• | Decrease of $20.0 million from international wholesale customers across various markets. |
• | $48.2 million increase in expenses related to retail store operations, primarily due to new store openings; |
• | $24.9 million in expenses for selling, distribution, and administrative expenses for Skip Hop; |
• | $21.2 million for provisions for special employee compensation; |
• | $17.4 million increase in expenses for eCommerce operations; |
• | $6.4 million increase in expenses for marketing and brand management; |
• | $3.0 million increase in expenses for in-housed sourcing operations; and |
• | $2.5 million increase in expenses for other general and administrative expenses. |
• | $4.4 million decrease in information technology and systems costs; |
• | $3.6 million decrease in the fair value of the earn-out obligation for Skip Hop; |
• | $2.4 million decrease in performance-based compensation expenses; and |
• | $1.7 million decrease in amortization of the H.W. Carter & Sons trademarks. |
(dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Unallocated Corporate Expenses | Consolidated | |||||||||||||||
Operating income for fiscal 2016 | $ | 211,951 | $ | 260,953 | $ | 59,194 | $ | (106,170 | ) | $ | 425,928 | |||||||||
Favorable (unfavorable) change in fiscal 2017: | ||||||||||||||||||||
Gross profit | 76,937 | 11,902 | 15,745 | 250 | 104,834 | |||||||||||||||
Royalty income | 3,224 | (1,233 | ) | (1,625 | ) | — | 366 | |||||||||||||
SG&A expenses | (76,472 | ) | (19,532 | ) | (26,888 | ) | 11,371 | (111,521 | ) | |||||||||||
Operating income for fiscal 2017 | $ | 215,640 | $ | 252,090 | $ | 46,426 | $ | (94,549 | ) | $ | 419,607 |
U.S. Retail | U.S. Wholesale | International | |||||||
Operating margin for fiscal 2016 | 12.8 | % | 22.2 | % | 16.2 | % | |||
Favorable (unfavorable) bps changes in fiscal 2017: | |||||||||
Gross profit | 80 bps | 20 bps | (190) bps | ||||||
Royalty income | 10 bps | (20) bps | (60) bps | ||||||
SG&A expenses | (160) bps | (140) bps | (250) bps | ||||||
Operating margin for fiscal 2017 | 12.1 | % | 20.8 | % | 11.2 | % |
• | 80 bps increase in gross profit primarily due to growth in higher-margin eCommerce business and lower product costs; |
• | 10 bps increase in royalty income; and |
• | 160 bps increase in SG&A expenses primarily due to a: |
• | 80 bps increase due to provisions for special employee compensation; |
• | 40 bps increase in expenses associated with eCommerce; |
• | 20 bps increase in expenses associated with new retail stores and store restructuring costs; and |
• | 20 bps increase in distribution expenses. |
• | 20 bps increase in gross profit due to favorable product costs; |
• | 20 bps decrease in royalty income primarily due to insourcing formerly licensed product categories; and |
• | 140 bps increase in SG&A expenses, primarily due to a: |
• | 70 bps increase in distribution expenses; |
• | 30 bps increase due to provisions for special employee compensation; |
• | 20 bps increase in marketing and brand management expenses; and |
• | 20 bps increase in provisions for accounts receivable. |
• | 190 bps decrease in gross profit due to changes in channel and customer mix; |
• | 60 bps decrease in royalty income related to the purchase of our Mexican licensee, and decreases in income from certain licensees due to the insourcing of formerly licensed product categories; and |
• | 250 bps increase in SG&A expenses, primarily due to a: |
• | 70 bps increase expenses associates with eCommerce growth; |
• | 60 bps increase marketing and brand management expenses; |
• | 50 bps increase due to provisions for special employee compensation; |
• | 40 bps increase in expenses associated with new store costs; and |
• | 30 bps increase due to higher provisions for wholesale accounts receivable. |
• | Decrease of $5.2 million in consulting expenses; |
• | Decrease of $4.7 million in expenses related to information technology and systems; |
• | Decrease of $2.6 million in insurance and other employee-related costs; |
• | Decrease of $1.7 million in amortization expense for the H.W. Carter & Sons tradenames; and |
• | Increase of $2.9 million due to provisions for special employee compensation. |
Fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Number of shares repurchased | 1,879,529 | 2,103,401 | 3,049,381 | ||||||||
Aggregate cost of shares repurchased (dollars in thousands) | $ | 193,028 | $ | 188,762 | $ | 300,445 | |||||
Average price per share | $ | 102.70 | $ | 89.74 | $ | 98.53 |
(dollars in thousands) | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||||||||||||||||
Long-term debt | $ | — | $ | — | $ | 400,000 | $ | — | $ | 196,000 | $ | — | $ | 596,000 | |||||||||||||
Interest on debt(1) | 29,143 | 29,707 | 21,267 | 8,142 | 5,906 | — | 94,165 | ||||||||||||||||||||
Operating leases | 163,963 | 150,010 | 134,203 | 116,773 | 102,487 | 235,731 | 903,167 | ||||||||||||||||||||
Other | 288 | 288 | 288 | 288 | 120 | — | 1,272 | ||||||||||||||||||||
Total financial obligations | $ | 193,394 | $ | 180,005 | $ | 555,758 | $ | 125,203 | $ | 304,513 | $ | 235,731 | $ | 1,594,604 | |||||||||||||
Letters of credit | 5,018 | — | — | — | — | — | 5,018 | ||||||||||||||||||||
Total financial obligations and commitments(2)(3)(4) | $ | 198,412 | $ | 180,005 | $ | 555,758 | $ | 125,203 | $ | 304,513 | $ | 235,731 | $ | 1,599,622 |
(1) | Reflects: i) estimated variable rate interest on obligations outstanding on our secured revolving credit facility as of December 29, 2018 using an interest rate of 4.11% and ii) a fixed interest rate of 5.25% for the senior notes. |
(2) | The table above excludes our reserves for income taxes, as we are unable to reasonably predict the ultimate amount or timing of settlement. |
(3) | The table above excludes purchase obligations. Our estimate as of December 29, 2018 for commitments to purchase inventory in the normal course of business, which are cancellable (with or without penalty, depending on the stage of production) and span a period of one year or less, was between $300 million and $400 million. |
(4) | The table above excludes any potential future Company funding for obligations under our defined benefit retirement plans. Our estimates of such obligations as of December 29, 2018 have been determined in accordance with U.S. GAAP and are included in other current liabilities and other long-term liabilities on our consolidated balance sheet, as described in Item 8 "Financial Statements and Supplementary Data” under Note 11, Employee Benefit Plans, to the consolidated financial statements. |
• | Volatility – This is a measure of the amount by which a stock price has fluctuated or is expected to fluctuate. We use actual monthly historical changes in the market value of our stock covering the expected life of stock options being valued. An increase in the expected volatility will increase the fair value of the stock option and related compensation expense. |
• | Risk-free interest rate – This is the U.S. Treasury rate as of the grant date having a term equal to the expected term of the stock option. An increase in the risk-free interest rate will increase the fair value of the stock option and related compensation expense. |
• | Expected term – This is the period of time over which the stock options granted are expected to remain outstanding and is based on historical experience and estimated future exercise behavior. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. An increase in the expected term will increase the fair value of the stock option and related compensation expense. |
• | Dividend yield – We estimate a dividend yield based on the current dividend amount as a percentage of our current stock price. An increase in the dividend yield will decrease the fair value of the stock option and related stock-based compensation expense. |
• | Forfeitures – We estimate forfeitures of stock-based awards based on historical experience and expected future activity. |
Page | |
Consolidated Balance Sheets at December 29, 2018 and December 30, 2017 | |
Consolidated Statements of Operations for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |
Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |
Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |
Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |
December 29, 2018 | December 30, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 170,077 | $ | 178,494 | |||
Accounts receivable, net | 258,259 | 240,561 | |||||
Finished goods inventories | 574,226 | 548,722 | |||||
Prepaid expenses and other current assets | 40,396 | 52,935 | |||||
Total current assets | 1,042,958 | 1,020,712 | |||||
Property, plant, and equipment, net | 350,437 | 377,924 | |||||
Tradenames, net | 365,692 | 365,551 | |||||
Goodwill | 227,101 | 230,424 | |||||
Customer relationships, net | 44,511 | 47,996 | |||||
Other assets | 28,159 | 28,435 | |||||
Total assets | $ | 2,058,858 | $ | 2,071,042 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 199,076 | $ | 182,114 | |||
Other current liabilities | 128,345 | 149,134 | |||||
Total current liabilities | 327,421 | 331,248 | |||||
Long-term debt, net | 593,264 | 617,306 | |||||
Deferred income taxes | 87,347 | 84,944 | |||||
Other long-term liabilities | 181,393 | 180,128 | |||||
Total liabilities | 1,189,425 | 1,213,626 | |||||
Commitments and contingencies - Note 18 | |||||||
Stockholders’ equity: | |||||||
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at December 29, 2018 and December 30, 2017 | — | — | |||||
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 45,629,014 and 47,178,346 shares issued and outstanding at December 29, 2018 and December 30, 2017, respectively | 456 | 472 | |||||
Accumulated other comprehensive loss | (40,839 | ) | (29,093 | ) | |||
Retained earnings | 909,816 | 886,037 | |||||
Total stockholders’ equity | 869,433 | 857,416 | |||||
Total liabilities and stockholders’ equity | $ | 2,058,858 | $ | 2,071,042 |
For the fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Net sales | $ | 3,462,269 | $ | 3,400,504 | $ | 3,198,543 | |||||
Cost of goods sold | 1,964,786 | 1,917,150 | 1,820,024 | ||||||||
Gross profit | 1,497,483 | 1,483,354 | 1,378,519 | ||||||||
Royalty income, net | 38,930 | 43,181 | 42,815 | ||||||||
Selling, general, and administrative expenses | 1,144,980 | 1,106,928 | 995,406 | ||||||||
Operating income | 391,433 | 419,607 | 425,928 | ||||||||
Interest expense | 34,569 | 30,044 | 27,044 | ||||||||
Interest income | (527 | ) | (345 | ) | (563 | ) | |||||
Other (income) expense, net | 1,416 | (1,164 | ) | 4,007 | |||||||
Income before income taxes | 355,975 | 391,072 | 395,440 | ||||||||
Provision for income taxes | 73,907 | 88,224 | 137,731 | ||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | |||||
Basic net income per common share | $ | 6.06 | $ | 6.31 | $ | 5.12 | |||||
Diluted net income per common share | $ | 6.00 | $ | 6.24 | $ | 5.08 | |||||
Dividend declared and paid per common share | $ | 1.80 | $ | 1.48 | $ | 1.32 |
For the fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | |||||
Other comprehensive income: | |||||||||||
Unrealized loss on OshKosh defined benefit plan, net of tax benefit of $80, $140, and $400 for the fiscal years 2018, 2017, and 2016, respectively | (281 | ) | (430 | ) | (666 | ) | |||||
Unrealized gain (loss) on Carter's post-retirement benefit obligation, net of (tax) or tax benefit of ($70), $70, and ($200) for fiscal years 2018, 2017, and 2016, respectively | 214 | (262 | ) | 331 | |||||||
Foreign currency translation adjustments | (11,679 | ) | 6,339 | 1,962 | |||||||
Total other comprehensive income | (11,746 | ) | 5,647 | 1,627 | |||||||
Comprehensive income | $ | 270,322 | $ | 308,495 | $ | 259,336 |
For the fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation of property, plant, and equipment | 85,936 | 81,796 | 71,522 | ||||||||
Amortization of intangible assets | 3,717 | 2,616 | 1,919 | ||||||||
Adjustment and accretion of contingent considerations | — | (3,600 | ) | — | |||||||
Amortization of debt issuance costs | 1,746 | 1,572 | 1,461 | ||||||||
Non-cash stock-based compensation expense | 14,673 | 17,549 | 16,847 | ||||||||
Unrealized foreign currency exchange loss (gain), net | 271 | (624 | ) | 33 | |||||||
Provisions for doubtful accounts receivable from customers | 15,801 | 4,663 | 562 | ||||||||
Income tax benefit from stock-based compensation | — | — | (4,800 | ) | |||||||
Loss on disposal of property, plant, and equipment | 995 | 1,572 | 1,167 | ||||||||
Deferred income taxes | (1,018 | ) | (54,936 | ) | 1,061 | ||||||
Effect of changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable, net | (34,448 | ) | (22,709 | ) | 4,479 | ||||||
Inventories | (30,646 | ) | (20,922 | ) | (17,482 | ) | |||||
Prepaid expenses and other assets | 12,121 | (21,791 | ) | 1,141 | |||||||
Accounts payable and other liabilities | 4,982 | 41,587 | 33,610 | ||||||||
Net cash provided by operating activities | 356,198 | 329,621 | 369,229 | ||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (63,783 | ) | (69,473 | ) | (88,556 | ) | |||||
Acquisitions of businesses, net of cash acquired | 96 | (158,457 | ) | — | |||||||
Disposals of property, plant, and equipment | 380 | 15 | 216 | ||||||||
Net cash used in investing activities | (63,307 | ) | (227,915 | ) | (88,340 | ) | |||||
Cash flows from financing activities: | |||||||||||
Payments of debt issuance costs | (968 | ) | (2,119 | ) | — | ||||||
Borrowings under secured revolving credit facility | 290,000 | 200,000 | — | ||||||||
Payments on secured revolving credit facility | (315,000 | ) | (163,965 | ) | — | ||||||
Repurchases of common stock | (193,028 | ) | (188,762 | ) | (300,445 | ) | |||||
Dividends paid | (83,717 | ) | (70,914 | ) | (66,355 | ) | |||||
Income tax benefit from stock-based compensation | — | — | 4,800 | ||||||||
Withholdings of taxes from vesting of restricted stock | (6,830 | ) | (5,753 | ) | (8,673 | ) | |||||
Proceeds from exercises of stock options | 10,597 | 8,438 | 7,166 | ||||||||
Net cash used in financing activities | (298,946 | ) | (223,075 | ) | (363,507 | ) | |||||
Net effect of exchange rate changes on cash | (2,362 | ) | 505 | 767 | |||||||
Net (decrease) increase in cash and cash equivalents | (8,417 | ) | (120,864 | ) | (81,851 | ) | |||||
Cash and cash equivalents, beginning of fiscal year | 178,494 | 299,358 | 381,209 | ||||||||
Cash and cash equivalents, end of fiscal year | $ | 170,077 | $ | 178,494 | $ | 299,358 |
Common stock - shares | Common stock - $ | Additional paid-in capital | Accumulated other comprehensive (loss) income | Retained earnings | Total stockholders’ equity | |||||||||||||||||
Balance at January 2, 2016 | 51,764,309 | $ | 518 | $ | — | $ | (36,367 | ) | $ | 911,536 | $ | 875,687 | ||||||||||
Income tax benefit from stock-based compensation | — | — | 4,800 | — | — | 4,800 | ||||||||||||||||
Exercise of stock options | 160,200 | 2 | 7,164 | — | — | 7,166 | ||||||||||||||||
Withholdings from vesting of restricted stock | (91,629 | ) | (1 | ) | (8,672 | ) | — | — | (8,673 | ) | ||||||||||||
Restricted stock activity | 152,413 | 1 | (1 | ) | — | — | — | |||||||||||||||
Stock-based compensation expense | — | — | 15,662 | — | — | 15,662 | ||||||||||||||||
Issuance of common stock | 12,758 | — | 1,185 | — | — | 1,185 | ||||||||||||||||
Repurchase of common stock | (3,049,381 | ) | (31 | ) | (20,138 | ) | — | (280,276 | ) | (300,445 | ) | |||||||||||
Cash dividends declared and paid | — | — | — | — | (66,355 | ) | (66,355 | ) | ||||||||||||||
Comprehensive income | — | — | — | 1,627 | 257,709 | 259,336 | ||||||||||||||||
Balance at December 31, 2016 | 48,948,670 | $ | 489 | $ | — | $ | (34,740 | ) | $ | 822,614 | $ | 788,363 | ||||||||||
Exercise of stock options | 240,850 | 2 | 8,436 | — | — | 8,438 | ||||||||||||||||
Withholdings from vesting of restricted stock | (67,546 | ) | (1 | ) | (5,752 | ) | — | — | (5,753 | ) | ||||||||||||
Restricted stock activity | 145,913 | 2 | (2 | ) | — | — | — | |||||||||||||||
Stock-based compensation expense | — | — | 16,378 | — | — | 16,378 | ||||||||||||||||
Issuance of common stock | 13,860 | 1 | 1,170 | — | — | 1,171 | ||||||||||||||||
Repurchases of common stock | (2,103,401 | ) | (21 | ) | (20,230 | ) | — | (168,511 | ) | (188,762 | ) | |||||||||||
Cash dividends declared and paid | — | — | — | — | (70,914 | ) | (70,914 | ) | ||||||||||||||
Comprehensive income | — | — | — | 5,647 | 302,848 | 308,495 | ||||||||||||||||
Balance at December 30, 2017 | 47,178,346 | $ | 472 | $ | — | $ | (29,093 | ) | $ | 886,037 | $ | 857,416 | ||||||||||
Exercise of stock options | 261,113 | 3 | 10,594 | — | — | 10,597 | ||||||||||||||||
Withholdings from vesting of restricted stock | (57,554 | ) | (1 | ) | (6,829 | ) | — | — | (6,830 | ) | ||||||||||||
Restricted stock activity | 126,638 | 1 | (1 | ) | — | — | — | |||||||||||||||
Stock-based compensation expense | — | — | 14,673 | — | — | 14,673 | ||||||||||||||||
Repurchases of common stock | (1,879,529 | ) | (19 | ) | (18,437 | ) | — | (174,572 | ) | (193,028 | ) | |||||||||||
Cash dividends declared and paid | — | — | — | — | (83,717 | ) | (83,717 | ) | ||||||||||||||
Comprehensive income | — | — | — | (11,746 | ) | 282,068 | 270,322 | |||||||||||||||
Balance at December 29, 2018 | 45,629,014 | $ | 456 | $ | — | $ | (40,839 | ) | $ | 909,816 | $ | 869,433 |
Level 1: | Quoted prices in active markets for identical assets or liabilities. |
Level 2: | Quoted prices for similar assets and liabilities in active markets or inputs that are observable. |
Level 3: | Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability. |
1) | Identify the contract with the customer; |
2) | Identity the performance obligation(s); |
3) | Determine the transaction price; |
4) | Allocate the transaction price to each performance obligation if multiple obligations exist; and |
5) | Recognize the revenue as the performance obligations are satisfied |
• | Portfolio Approach - The Company uses the portfolio approach when multiple contracts or performance obligations are involved in the determination of revenue recognition. |
• | Taxes - The Company excludes from the transaction price any taxes collected from customers that are remitted to taxing authorities. |
• | Shipping and Handling Charges - Charges that are incurred before and after the customer obtains control of goods are deemed to be fulfillment costs. |
• | Time Value of Money - The Company's payment terms are less than one year from the transfer of goods. Therefore, the Company does not adjust promised amounts of consideration for the effects of the time value of money. |
• | Disclosure of Remaining Performance Obligations - The Company does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations for contracts that are one year or less in term. |
• | Volatility - This is a measure of the amount by which a stock price has fluctuated or is expected to fluctuate. The Company uses actual monthly historical changes in the market value of its stock covering the expected life of options being valued. An increase in the expected volatility will increase the fair value of the stock option and related compensation expense. |
• | Risk-free interest rate - This is the U.S. Treasury rate as of the grant date having a term equal to the expected term of the stock option. An increase in the risk-free interest rate will increase the fair value of the stock option and related compensation expense. |
• | Expected term - This is the period of time over which the stock options granted are expected to remain outstanding and is based on historical experience and estimated future exercise behavior. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. An increase in the expected term will increase the fair value of the stock option and the related compensation expense. |
• | Dividend yield - The Company estimates a dividend yield based on the current dividend amount as a percentage of the current stock price. An increase in the dividend yield will decrease the fair value of the stock option and the related compensation expenses. |
• | Forfeitures - The Company estimates forfeitures of stock-based awards based on historical experience and expected future activity. |
• | Accelerated the recognition of breakage revenue from unredeemed gift cards, which affected net sales, gross profit, income before income taxes, and net income on the Company's statements of operations. Basic and diluted net income per share were affected by $0.01 or less for each reporting period. Related gift card liabilities and income tax liabilities were also affected. |
• | A portion of the estimated value of goods expected to be returned by customers was reclassified between net sales and cost of goods sold, with no net effect on gross profit, income before income taxes, or net income on the Company's statement of operations. Related reclassifications were also made between other current assets and other current liabilities on the Company's balance sheets. |
For the fiscal year ended | ||||||||
(dollars in thousands, except per share data) | 2017 | 2016 | ||||||
Net sales | $ | 92 | $ | (637 | ) | |||
Cost of goods sold | $ | 52 | $ | (7 | ) | |||
Income before income taxes | $ | 40 | $ | (630 | ) | |||
Net income | $ | 84 | $ | (397 | ) | |||
Basic net income per common share | $ | — | $ | (0.01 | ) | |||
Diluted net income per common share | $ | — | $ | — |
(dollars in thousands) | As Previously Reported | ASC 606 Adjustments | As Amended for ASC 606 | ||||||||
ASSETS | |||||||||||
Prepaid expenses and other current assets | $ | 49,892 | $ | 3,043 | (1) | $ | 52,935 | ||||
Total current assets | $ | 1,017,669 | $ | 3,043 | $ | 1,020,712 | |||||
Total assets | $ | 2,067,999 | $ | 3,043 | $ | 2,071,042 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Other current liabilities | $ | 146,510 | $ | 2,624 | (2) | $ | 149,134 | ||||
Total current liabilities | $ | 328,624 | $ | 2,624 | $ | 331,248 | |||||
Deferred income taxes | $ | 84,848 | $ | 96 | $ | 84,944 | |||||
Total liabilities | $ | 1,210,906 | $ | 2,720 | $ | 1,213,626 | |||||
Retained earnings | $ | 885,714 | $ | 323 | (3) | $ | 886,037 | ||||
Total stockholder's equity | $ | 857,093 | $ | 323 | $ | 857,416 | |||||
Total liabilities and stockholders' equity | $ | 2,067,999 | $ | 3,043 | $ | 2,071,042 |
(1) | Reclassification of estimated inventory expected to be returned by customers through future sales refund transactions. This amount was reclassified from the returns reserve (current liability) to a current asset. Prior to the Company's adoption of ASC 606, the Company's returns reserve (current liability) was reported net of the estimated inventory expected to be returned by customers through sales refund transactions. |
(2) | Amount includes a reclassification of approximately $3.0 million for estimated inventory expected to be returned by customers, partially offset by a reclassification of approximately $0.4 million for gift card liabilities. |
(3) | Cumulative impact of approximately $0.6 million for after-tax adjustments to retained earnings at the beginning of fiscal 2016, offset by ASC 606 effects on fiscal 2017 and fiscal 2016 results of operations. |
Fiscal year ended December 29, 2018 | ||||||||||||||||
(dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||
Wholesale channel | $ | — | $ | 1,180,687 | $ | 163,637 | $ | 1,344,324 | ||||||||
Direct-to-consumer | 1,851,193 | — | 266,752 | $ | 2,117,945 | |||||||||||
$ | 1,851,193 | $ | 1,180,687 | $ | 430,389 | $ | 3,462,269 | |||||||||
Royalty income | $ | 12,877 | $ | 22,511 | $ | 3,542 | $ | 38,930 |
Fiscal year ended December 30, 2017 | ||||||||||||||||
(dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||
Wholesale channel | $ | — | $ | 1,209,663 | $ | 160,850 | $ | 1,370,513 | ||||||||
Direct-to-consumer | 1,775,378 | — | 254,613 | $ | 2,029,991 | |||||||||||
$ | 1,775,378 | $ | 1,209,663 | $ | 415,463 | $ | 3,400,504 | |||||||||
Royalty income | $ | 15,541 | $ | 23,767 | $ | 3,873 | $ | 43,181 |
Fiscal year ended December 31, 2016 | ||||||||||||||||
(dollars in thousands) | U.S. Retail | U.S. Wholesale | International | Total | ||||||||||||
Wholesale channel | $ | — | $ | 1,178,034 | $ | 133,681 | $ | 1,311,715 | ||||||||
Direct-to-consumer | 1,655,784 | — | 231,044 | $ | 1,886,828 | |||||||||||
$ | 1,655,784 | $ | 1,178,034 | $ | 364,725 | $ | 3,198,543 | |||||||||
Royalty income | $ | 12,318 | $ | 25,000 | $ | 5,497 | $ | 42,815 |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | ||||||
Trade receivables from wholesale customers, net | $ | 244,258 | $ | 229,968 | ||||
Royalties receivable | 9,279 | 9,818 | ||||||
Tenant allowances and other receivables | 16,588 | 14,511 | ||||||
Total gross receivables | $ | 270,125 | $ | 254,297 | ||||
Less: | ||||||||
Wholesale accounts receivable reserves | (11,866 | ) | (13,736 | ) | ||||
Accounts receivable, net | $ | 258,259 | $ | 240,561 |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Contract liabilities-current: | |||||||
Unredeemed gift cards | $ | 14,471 | $ | 11,945 | |||
Unredeemed customer loyalty rewards | 7,764 | 7,355 | |||||
Total contract liabilities-current(*) | $ | 22,235 | $ | 19,300 |
* | Included with Other current liabilities on the Company's consolidated balance sheet. |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Fixtures, equipment, computer hardware and software | $ | 425,686 | $ | 430,156 | |||
Land, building, and leasehold improvements | 348,131 | 336,981 | |||||
Marketing fixtures | 7,001 | 7,602 | |||||
Construction in progress | 18,517 | 7,358 | |||||
799,335 | 782,097 | ||||||
Accumulated depreciation and amortization | (448,898 | ) | (404,173 | ) | |||
Total | $ | 350,437 | $ | 377,924 |
December 29, 2018 | December 30, 2017 | |||||||||||||||||||||||||
(dollars in thousands) | Weighted-average useful life | Gross amount | Accumulated amortization | Net amount | Gross amount | Accumulated amortization | Net amount | |||||||||||||||||||
Carter’s goodwill(1) | Indefinite | $ | 136,570 | $ | — | $ | 136,570 | $ | 136,570 | $ | — | $ | 136,570 | |||||||||||||
Canada goodwill(2) | Indefinite | 38,869 | — | 38,869 | 42,223 | — | 42,223 | |||||||||||||||||||
Skip Hop goodwill(3) | Indefinite | 45,960 | — | 45,960 | 45,997 | — | 45,997 | |||||||||||||||||||
Carter's Mexico goodwill(4) | Indefinite | 5,702 | — | 5,702 | 5,634 | — | 5,634 | |||||||||||||||||||
Total goodwill | $ | 227,101 | $ | — | $ | 227,101 | $ | 230,424 | $ | — | $ | 230,424 | ||||||||||||||
Carter’s tradename | Indefinite | $ | 220,233 | $ | — | $ | 220,233 | $ | 220,233 | $ | — | $ | 220,233 | |||||||||||||
OshKosh tradename | Indefinite | 85,500 | — | 85,500 | 85,500 | — | 85,500 | |||||||||||||||||||
Skip Hop tradename | Indefinite | 56,800 | — | 56,800 | 56,800 | — | 56,800 | |||||||||||||||||||
Finite-life tradenames | 5 - 20 years | 3,911 | 752 | 3,159 | 3,550 | 532 | 3,018 | |||||||||||||||||||
Total tradenames, net | $ | 366,444 | $ | 752 | $ | 365,692 | $ | 366,083 | $ | 532 | $ | 365,551 | ||||||||||||||
Skip Hop customer relationships | 15 years | $ | 47,300 | $ | 5,480 | $ | 41,820 | $ | 47,300 | $ | 2,304 | $ | 44,996 | |||||||||||||
Carter's Mexico customer relationships | 10 years | 3,146 | 455 | 2,691 | 3,135 | 135 | 3,000 | |||||||||||||||||||
Total customer relationships, net | $ | 50,446 | $ | 5,935 | $ | 44,511 | $ | 50,435 | $ | 2,439 | $ | 47,996 |
(1) | $45.9 million is assigned to the U.S. Wholesale segment, $82.0 million is assigned to the U.S. Retail segment, and $8.6 million is assigned to the International segment. |
(2) | Goodwill for Canada (Bonnie Togs) is assigned to the International segment. |
(3) | $28.6 million is assigned to the U.S. Wholesale segment, $15.5 million is assigned to the International segment, and $1.9 million is assigned to the U.S. Retail segment. |
(4) | Goodwill for Carter's Mexico is assigned to the International segment. |
(dollars in thousands) | Amortization expense | |||||||
2019 | $ | 3,732 | ||||||
2020 | $ | 3,732 | ||||||
2021 | $ | 3,732 | ||||||
2022 | $ | 3,732 | ||||||
2023 | $ | 3,690 |
(dollars in thousands) | Pension liability adjustments | Post-retirement liability adjustments | Cumulative translation adjustments | Accumulated other comprehensive (loss) income | |||||||||||
Balance at January 2, 2016 | $ | (8,185 | ) | $ | 1,404 | $ | (29,586 | ) | $ | (36,367 | ) | ||||
Fiscal year 2016 change | (666 | ) | 331 | 1,962 | 1,627 | ||||||||||
Balance at December 31, 2016 | (8,851 | ) | 1,735 | (27,624 | ) | (34,740 | ) | ||||||||
Fiscal year 2017 change | (430 | ) | (262 | ) | 6,339 | 5,647 | |||||||||
Balance at December 30, 2017 | (9,281 | ) | 1,473 | (21,285 | ) | (29,093 | ) | ||||||||
Fiscal year 2018 change | (281 | ) | 214 | (11,679 | ) | (11,746 | ) | ||||||||
Balance at December 29, 2018 | $ | (9,562 | ) | $ | 1,687 | $ | (32,964 | ) | $ | (40,839 | ) |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Senior notes at amounts repayable | $ | 400,000 | $ | 400,000 | |||
Less: unamortized issuance-related costs for senior notes | (2,736 | ) | (3,694 | ) | |||
Senior notes, net | $ | 397,264 | $ | 396,306 | |||
Secured revolving credit facility | 196,000 | 221,000 | |||||
Total long-term debt, net | $ | 593,264 | $ | 617,306 |
Year | Percentage | ||
2018 | 101.31 | % | |
2019 and thereafter | 100.00 | % |
Fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Number of shares repurchased | 1,879,529 | 2,103,401 | 3,049,381 | ||||||||
Aggregate cost of shares repurchased (dollars in thousands) | $ | 193,028 | $ | 188,762 | $ | 300,445 | |||||
Average price per share | $ | 102.70 | $ | 89.74 | $ | 98.53 |
For the fiscal years ended | |||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||||
Stock options | $ | 4,788 | $ | 4,244 | $ | 4,237 | |||||
Restricted stock: | |||||||||||
Time-based awards | 7,938 | 7,532 | 7,451 | ||||||||
Performance-based awards | 744 | 4,602 | 3,974 | ||||||||
Stock awards | 1,203 | 1,171 | 1,185 | ||||||||
Total | $ | 14,673 | $ | 17,549 | $ | 16,847 |
Number of shares | Weighted- average exercise price | Weighted-average remaining contractual terms (years) | Aggregate intrinsic value (in thousands) | |||||||
Outstanding, December 30, 2017 | 1,494,223 | $61.76 | ||||||||
Granted | 255,532 | $118.43 | ||||||||
Exercised | (261,113 | ) | $40.58 | |||||||
Forfeited | (40,533 | ) | $98.01 | |||||||
Expired | (968 | ) | $95.10 | |||||||
Outstanding, December 29, 2018 | 1,447,141 | $74.55 | 5.96 | $ | 21,714 | |||||
Vested and Expected to Vest, December 29, 2018 | 1,377,440 | $73.10 | 5.82 | $ | 21,714 | |||||
Exercisable, December 29, 2018 | 851,264 | $57.33 | 4.31 | $ | 21,714 |
For the fiscal years ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Expected volatility | 22.93 | % | 26.20 | % | 26.95 | % | |||||
Risk-free interest rate | 2.75 | % | 2.06 | % | 1.33 | % | |||||
Expected term (years) | 6.0 | 6.0 | 6.0 | ||||||||
Dividend yield | 1.47 | % | 1.77 | % | 1.45 | % | |||||
Weighted average fair value of options granted | $ | 27.36 | $ | 19.57 | $ | 21.41 |
Restricted stock awards | Weighted-average grant-date fair value | |||||
Outstanding, December 30, 2017 | 397,848 | $ | 85.44 | |||
Granted | 143,085 | $ | 118.03 | |||
Vested | (151,321 | ) | $ | 84.56 | ||
Forfeited | (15,604 | ) | $ | 97.83 | ||
Outstanding, December 29, 2018 | 374,008 | $ | 97.57 |
Fiscal year | Number of shares granted | Weighted-average fair value per share | |||||
2016 | 53,070 | $ | 90.66 | ||||
2017 | 60,952 | $ | 83.84 | ||||
2018 | 45,625 | $ | 120.25 |
Fiscal year | Number of shares issued | Fair value per share | Aggregate value (in thousands) | |||
2016 | 12,758 | $101.10 | $1,290 | |||
2017 | 13,860 | $84.46 | $1,171 | |||
2018 | 10,971 | $109.67 | $1,203 |
For the fiscal year ended | |||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Change in projected benefit obligation: | |||||||
Projected benefit obligation at beginning of year | $ | 66,747 | $ | 62,427 | |||
Interest cost | 2,287 | 2,446 | |||||
Actuarial (gain) loss | (4,371 | ) | 4,269 | ||||
Benefits paid | (2,366 | ) | (2,395 | ) | |||
Projected benefit obligation at end of year | $ | 62,297 | $ | 66,747 | |||
Change in plan assets: | |||||||
Fair value of plan assets at beginning of year | $ | 54,437 | $ | 51,213 | |||
Actual return on plan assets | (2,507 | ) | 5,619 | ||||
Employer contribution | 6,000 | — | |||||
Benefits paid | (2,366 | ) | (2,395 | ) | |||
Fair value of plan assets at end of year | $ | 55,564 | $ | 54,437 | |||
Unfunded status | $ | 6,733 | $ | 12,310 |
For the fiscal year ended | |||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||||
Recognized in the statement of operations: | |||||||||||
Interest cost | $ | 2,287 | $ | 2,446 | $ | 2,515 | |||||
Expected return on plan assets | (2,934 | ) | (2,601 | ) | (2,701 | ) | |||||
Recognized actuarial loss(1) | 709 | 681 | 578 | ||||||||
Net periodic pension cost | $ | 62 | $ | 526 | $ | 392 | |||||
Changes recognized in other comprehensive income: | |||||||||||
Net loss arising during the fiscal year | $ | 1,070 | $ | 1,251 | $ | 1,644 | |||||
Amortization of net loss(1) | (709 | ) | (681 | ) | (578 | ) | |||||
Total changes recognized in other comprehensive income | $ | 361 | $ | 570 | $ | 1,066 | |||||
Total net periodic cost and changes recognized in other comprehensive income | $ | 423 | $ | 1,096 | $ | 1,458 |
(1) | Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2019, approximately $0.8 million is expected to be reclassified from accumulated other comprehensive loss to a component of net periodic pension cost. |
Benefit obligation | 2018 | 2017 | |||
Discount rate | 4.00% | 3.50% | |||
Net periodic pension cost | 2018 | 2017 | 2016 | ||
Discount rate | 3.50% | 4.00% | 4.25% | ||
Expected long-term rate of return on assets | 6.25% | 6.00% | 6.00% |
(dollars in thousands) | |||
2019 | $ | 3,020 | |
2020 | $ | 2,600 | |
2021 | $ | 2,660 | |
2022 | $ | 2,860 | |
2023 | $ | 2,940 | |
2024-2028 | $ | 17,850 |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||||||||||||||||||||
Asset Category | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | |||||||||||||||||||
Cash and cash equivalents | $ | 550 | $ | 550 | $ | — | $ | 539 | $ | 539 | $ | — | |||||||||||||
Equity Securities: | |||||||||||||||||||||||||
U.S. Large-Cap blend(1) | 7,693 | 7,693 | — | 7,418 | 7,418 | — | |||||||||||||||||||
U.S. Large-Cap growth | 3,478 | 3,478 | — | 3,331 | 3,331 | — | |||||||||||||||||||
U.S. Mid-Cap growth | 3,355 | 3,355 | — | 3,228 | 3,228 | — | |||||||||||||||||||
U.S. Small-Cap blend | 2,224 | 2,224 | — | 2,147 | 2,147 | — | |||||||||||||||||||
International blend | 8,302 | 8,302 | — | 8,142 | 8,142 | — | |||||||||||||||||||
Fixed income securities: | |||||||||||||||||||||||||
Corporate bonds(2) | 27,247 | 27,006 | 241 | 26,888 | 26,480 | 408 | |||||||||||||||||||
Real estate(3) | 2,715 | 2,715 | — | 2,744 | 2,744 | — | |||||||||||||||||||
$ | 55,564 | $ | 55,323 | $ | 241 | $ | 54,437 | $ | 54,029 | $ | 408 |
(1) | This category comprises low-cost equity index funds not actively managed that track the Standard & Poor's 500 Index. |
(2) | This category invests in both U.S. Treasuries and mid-term corporate debt from U.S. issuers from diverse industries. |
(3) | This category represents an investment in a mutual fund that invests primarily in real estate securities, including common stocks, preferred stock and other equity securities issued by real estate companies. |
For the fiscal years ended | |||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
APBO at beginning of fiscal year | $ | 3,969 | $ | 4,125 | |||
Service cost | 32 | 30 | |||||
Interest cost | 123 | 137 | |||||
Actuarial loss (gain) | (573 | ) | 26 | ||||
Plan participants' contribution | 1 | 6 | |||||
Benefits paid | (324 | ) | (355 | ) | |||
APBO at end of fiscal year | $ | 3,228 | $ | 3,969 |
For the fiscal year ended | ||||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Recognized in the statement of operations: | ||||||||||||
Service cost – benefits attributed to service during the period | $ | 32 | $ | 30 | $ | 123 | ||||||
Interest cost on accumulated post-retirement benefit obligation | 123 | 137 | 177 | |||||||||
Amortization net actuarial gain(*) | (289 | ) | (306 | ) | (198 | ) | ||||||
Net periodic post-retirement (benefit) cost | $ | (134 | ) | $ | (139 | ) | $ | 102 | ||||
Changes recognized in other comprehensive income: | ||||||||||||
Net loss (gain) arising during the fiscal year | $ | (573 | ) | $ | 26 | $ | (740 | ) | ||||
Prior service cost | — | — | 11 | |||||||||
Amortization of net gain(*) | 289 | 306 | 198 | |||||||||
Total changes recognized in other comprehensive income | $ | (284 | ) | $ | 332 | $ | (531 | ) | ||||
Total net periodic (benefit) cost and changes recognized in other comprehensive income | $ | (418 | ) | $ | 193 | $ | (429 | ) |
(*) | Represents pre-tax amounts reclassified from accumulated other comprehensive loss. For fiscal 2019, approximately $0.4 million is expected to be reclassified from accumulated other comprehensive loss as a credit to periodic net periodic pension cost. |
Benefit obligation | 2018 | 2017 | |||
Discount rate | 4.00% | 3.25% | |||
Net periodic pension cost | 2018 | 2017 | 2016 | ||
Discount rate | 3.25% | 3.50% | 3.75% |
For the fiscal year ended | |||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||||
Current tax provision: | |||||||||||
Federal | $ | 48,129 | $ | 117,676 | $ | 113,326 | |||||
State | 9,437 | 11,368 | 11,407 | ||||||||
Foreign | 17,359 | 14,116 | 11,937 | ||||||||
Total current provision | $ | 74,925 | $ | 143,160 | $ | 136,670 | |||||
Deferred tax provision (benefit): | |||||||||||
Federal | $ | (760 | ) | $ | (55,191 | ) | $ | 1,215 | |||
State | 140 | 337 | 332 | ||||||||
Foreign | (398 | ) | (82 | ) | (486 | ) | |||||
Total deferred provision | (1,018 | ) | (54,936 | ) | 1,061 | ||||||
Total provision | $ | 73,907 | $ | 88,224 | $ | 137,731 |
For the fiscal year ended | |||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||||
Domestic | $ | 260,722 | $ | 325,620 | $ | 344,674 | |||||
Foreign | 95,253 | 65,452 | 50,766 | ||||||||
Total | $ | 355,975 | $ | 391,072 | $ | 395,440 |
For the fiscal year ended | ||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||
Statutory federal income tax rate | 21.0 | % | 35.0 | % | 35.0 | % | ||
State income taxes, net of federal income tax benefit | 2.8 | % | 2.1 | % | 2.3 | % | ||
Impact of foreign operations | (1.5 | )% | (2.7 | )% | (2.1 | )% | ||
Settlement of uncertain tax positions | (0.4 | )% | (0.3 | )% | (0.4 | )% | ||
Benefit from stock-based compensation | (1.1 | )% | (1.3 | )% | — | % | ||
Imposition of transition tax on foreign subsidiaries | — | % | 2.7 | % | — | % | ||
Revaluation of deferred taxes | — | % | (12.9 | )% | — | % | ||
Total | 20.8 | % | 22.6 | % | 34.8 | % |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Deferred tax assets: | Assets (Liabilities) | ||||||
Accounts receivable allowance | $ | 3,674 | $ | 3,632 | |||
Inventory | 7,785 | 6,759 | |||||
Accrued liabilities | 10,672 | 13,174 | |||||
Equity-based compensation | 5,278 | 6,796 | |||||
Deferred employee benefits | 6,425 | 8,112 | |||||
Deferred rent | 33,761 | 34,422 | |||||
Other | 3,007 | 2,335 | |||||
Total deferred tax assets | 70,602 | 75,230 | |||||
Deferred tax liabilities: | |||||||
Depreciation | (62,898 | ) | (63,763 | ) | |||
Tradename and licensing agreements | (89,194 | ) | (89,142 | ) | |||
Other | (3,774 | ) | (5,328 | ) | |||
Total deferred tax liabilities | (155,866 | ) | (158,233 | ) | |||
Net deferred tax asset (liability) | $ | (85,264 | ) | $ | (83,003 | ) |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Assets (Liabilities) | |||||||
Deferred tax assets(*) | $ | 2,083 | $ | 1,941 | |||
Deferred tax liabilities | (87,347 | ) | (84,944 | ) | |||
Net deferred tax asset (liability) | $ | (85,264 | ) | $ | (83,003 | ) |
(*) | At December 30, 2017, deferred tax assets are a component of non-current Other assets on the Company's consolidated balance sheet. |
(dollars in thousands) | |||
Balance at January 2, 2016 | $ | 9,415 | |
Additions based on tax positions related to fiscal 2016 | 2,849 | ||
Reductions for prior year tax positions | (39 | ) | |
Reductions for lapse of statute of limitations | (995 | ) | |
Reductions for prior year tax settlements | (693 | ) | |
Balance at December 31, 2016 | $ | 10,537 | |
Additions based on tax positions related to fiscal 2017 | 3,380 | ||
Reductions for prior year tax positions | (120 | ) | |
Reductions for lapse of statute of limitations | (1,604 | ) | |
Balance at December 30, 2017 | $ | 12,193 | |
Additions based on tax positions related to fiscal 2018 | 3,350 | ||
Additions for prior year tax positions | 241 | ||
Reductions for lapse of statute of limitations | (1,867 | ) | |
Balance at December 29, 2018 | $ | 13,917 |
For the fiscal year ended | |||||||||||
December 29, 2018 | December 30, 2017 | December 31, 2016 | |||||||||
Weighted-average number of common and common equivalent shares outstanding: | |||||||||||
Basic number of common shares outstanding | 46,160,935 | 47,593,211 | 49,917,858 | ||||||||
Dilutive effect of equity awards | 487,485 | 552,864 | 457,849 | ||||||||
Diluted number of common and common equivalent shares outstanding | 46,648,420 | 48,146,075 | 50,375,707 | ||||||||
Earnings per share: | |||||||||||
(dollars in thousands, except per share data) | |||||||||||
Basic net income per common share: | |||||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | |||||
Income allocated to participating securities | (2,148 | ) | (2,407 | ) | (2,046 | ) | |||||
Net income available to common shareholders | $ | 279,920 | $ | 300,441 | $ | 255,663 | |||||
Basic net income per common share | $ | 6.06 | $ | 6.31 | $ | 5.12 | |||||
Diluted net income per common share: | |||||||||||
Net income | $ | 282,068 | $ | 302,848 | $ | 257,709 | |||||
Income allocated to participating securities | (2,132 | ) | (2,386 | ) | (2,032 | ) | |||||
Net income available to common shareholders | $ | 279,936 | $ | 300,462 | $ | 255,677 | |||||
Diluted net income per common share | $ | 6.00 | $ | 6.24 | $ | 5.08 | |||||
Anti-dilutive shares excluded from dilutive earnings per share calculations(1) | 289,839 | 629,944 | 247,460 |
(1) | The volume of antidilutive shares is, in part, due to the related unamortized compensation costs. |
For the fiscal year ended | ||||||||||||||||||||
(dollars in thousands) | December 29, 2018 | % of Total | December 30, 2017 | % of Total | December 31, 2016 | % of Total | ||||||||||||||
Net sales: | ||||||||||||||||||||
U.S. Retail | $ | 1,851,193 | 53.5 | % | $ | 1,775,378 | 52.2 | % | $ | 1,655,784 | 51.8 | % | ||||||||
U.S. Wholesale | 1,180,687 | 34.1 | % | 1,209,663 | 35.6 | % | 1,178,034 | 36.8 | % | |||||||||||
International | 430,389 | 12.4 | % | 415,463 | 12.2 | % | 364,725 | 11.4 | % | |||||||||||
Total net sales | $ | 3,462,269 | 100.0 | % | $ | 3,400,504 | 100.0 | % | $ | 3,198,543 | 100.0 | % | ||||||||
Operating income: | % of segment net sales | % of segment net sales | % of segment net sales | |||||||||||||||||
U.S. Retail(1)(2)(4) | $ | 224,784 | 12.1 | % | $ | 215,640 | 12.1 | % | $ | 211,951 | 12.8 | % | ||||||||
U.S. Wholesale(3)(4) | 224,194 | 19.0 | % | 252,090 | 20.8 | % | 260,953 | 22.2 | % | |||||||||||
International(4)(5) | 39,253 | 9.1 | % | 46,426 | 11.2 | % | 59,194 | 16.2 | % | |||||||||||
Corporate expenses(6)(7) | (96,798 | ) | (94,549 | ) | (106,170 | ) | ||||||||||||||
Total operating income | $ | 391,433 | 11.3 | % | $ | 419,607 | 12.3 | % | $ | 425,928 | 13.3 | % |
(1) | Fiscal 2018 includes insurance recovery of approximately $0.4 million associated with unusual storm-related store closures in 2017. |
(2) | Fiscal 2017 includes approximately $2.7 million of expenses related to store restructuring and approximately $12.7 million for provisions for special employee compensation. |
(3) | Includes approximately $12.8 million of charges, partially offset by a $1.9 million recovery claim settlement, related to a customer bankruptcy for fiscal 2018. Fiscal 2017 includes approximately $3.3 million for provisions for special employee compensation. |
(4) | Includes $1.2 million of certain costs related to inventory acquired from Skip Hop in operating income between U.S. Wholesale, U.S. Retail, and International for fiscal 2017. |
(5) | Includes international licensing income. Fiscal 2018 includes approximately $5.3 million in costs associated with changes to the Company's business model in China, which includes inventory and severance charges. Fiscal 2017 includes approximately $2.3 million for provisions for special employee compensation. |
(6) | Includes expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, building occupancy, information technology, certain legal fees, consulting, and audit fees. |
For the fiscal year ended | ||||||||
(dollars in millions) | December 30, 2017 | December 31, 2016 | ||||||
Provisions for special employee compensation | $ | 2.9 | $ | — | ||||
Amortization of H.W. Carter and Sons tradenames | $ | — | $ | 1.7 | ||||
Adjustment to Skip Hop contingent consideration | $ | (3.6 | ) | $ | — | |||
Direct sourcing initiative | $ | 0.3 | $ | 0.7 | ||||
Acquisition-related costs | $ | 3.4 | $ | 2.4 |
For the fiscal year ended | |||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
U.S. Wholesale(*) | $ | 414,174 | $ | 389,484 | |||
U.S. Retail | 96,241 | 93,404 | |||||
International | 63,811 | 65,834 | |||||
Total | $ | 574,226 | $ | 548,722 |
(*) | U.S. Wholesale inventories also include inventory produced and warehoused for the U.S. Retail segment. |
For the fiscal year ended | |||||||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | December 31, 2016 | ||||||||
Baby | $ | 1,239,009 | $ | 1,294,404 | $ | 1,241,452 | |||||
Playclothes | 1,303,610 | 1,239,546 | 1,214,995 | ||||||||
Sleepwear | 431,961 | 426,703 | 407,078 | ||||||||
Other(*) | 487,689 | 439,851 | 335,018 | ||||||||
Total net sales | $ | 3,462,269 | $ | 3,400,504 | $ | 3,198,543 |
(*) | Other product offerings include bedding, outwear, swimwear, shoes, socks, diaper bags, gift sets, toys, and hair accessories. |
For the fiscal year ended | |||||||
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
United States | $ | 314,679 | $ | 337,369 | |||
International | 35,758 | 40,555 | |||||
Total | $ | 350,437 | $ | 377,924 |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Accrued bonuses and incentive compensation | $ | 8,409 | $ | 27,566 | |||
Income taxes payable | 17,415 | 16,252 | |||||
Accrued employee benefits | 16,421 | 21,735 | |||||
Accrued and deferred rent | 19,120 | 18,213 |
(dollars in thousands) | December 29, 2018 | December 30, 2017 | |||||
Deferred lease incentives | $ | 72,345 | $ | 75,104 |
Fiscal Year | Operating Leases | ||
2019 | $ | 163,963 | |
2020 | 150,010 | ||
2021 | 134,203 | ||
2022 | 116,773 | ||
2023 | 102,487 | ||
Thereafter | 235,731 | ||
Total | $ | 903,167 |
(dollars in thousands) | Wholesale accounts receivable reserves | Wholesale sales returns reserves | Total | ||||||||
Balance at January 2, 2016 | $ | 8,543 | $ | 400 | $ | 8,943 | |||||
Additional provisions | 6,088 | — | 6,088 | ||||||||
Charges to reserve | (5,879 | ) | (400 | ) | (6,279 | ) | |||||
Balance at December 31, 2016 | $ | 8,752 | $ | — | $ | 8,752 | |||||
Additional provisions | 8,204 | — | 8,204 | ||||||||
Charges to reserve | (3,220 | ) | — | (3,220 | ) | ||||||
Balance at December 30, 2017 | $ | 13,736 | $ | — | $ | 13,736 | |||||
Additional provisions | 30,280 | — | 30,280 | ||||||||
Charges to reserve | (32,150 | ) | — | (32,150 | ) | ||||||
Balance at December 29, 2018 | $ | 11,866 | $ | — | $ | 11,866 |
(dollars in thousands, except per share data) | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4(2) | |||||||||||
Fiscal 2018: | |||||||||||||||
Net sales | $ | 755,786 | $ | 696,197 | $ | 923,907 | $ | 1,086,379 | |||||||
Gross profit | $ | 332,477 | $ | 309,958 | $ | 387,450 | $ | 467,598 | |||||||
Royalty income, net | $ | 7,994 | $ | 10,355 | $ | 10,224 | $ | 10,357 | |||||||
Selling, general, and administrative expenses | $ | 280,162 | $ | 263,343 | $ | 294,117 | $ | 307,358 | |||||||
Operating income | $ | 60,309 | $ | 56,970 | $ | 103,557 | $ | 170,597 | |||||||
Net income | $ | 42,469 | $ | 37,268 | $ | 71,770 | $ | 130,561 | |||||||
Basic net income per common share(1) | $ | 0.90 | $ | 0.80 | $ | 1.55 | $ | 2.85 | |||||||
Diluted net income per common share(1) | $ | 0.89 | $ | 0.79 | $ | 1.53 | $ | 2.83 | |||||||
Fiscal 2017: | |||||||||||||||
Net sales | $ | 732,827 | $ | 691,751 | $ | 948,046 | $ | 1,027,880 | |||||||
Gross profit | $ | 315,692 | $ | 303,247 | $ | 403,578 | $ | 460,837 | |||||||
Royalty income, net | $ | 10,558 | $ | 11,210 | $ | 10,350 | $ | 11,063 | |||||||
Selling, general, and administrative expenses | $ | 247,794 | $ | 250,146 | $ | 283,480 | $ | 325,508 | |||||||
Operating income | $ | 78,456 | $ | 64,311 | $ | 130,448 | $ | 146,392 | |||||||
Net income | $ | 46,595 | $ | 37,793 | $ | 82,316 | $ | 136,144 | |||||||
Basic net income per common share(1) | $ | 0.96 | $ | 0.78 | $ | 1.73 | $ | 2.88 | |||||||
Diluted net income per common share(1) | $ | 0.95 | $ | 0.77 | $ | 1.71 | $ | 2.85 |
(1) | May not be additive to the net income per common share amounts for the fiscal year due to the calculation provision of ASC 260, Earnings Per Share. |
(2) | The provision for income taxes recognized during the fourth quarter of fiscal 2017 reflects a benefit of $40.0 million related to the accounting for the December 22, 2017 enactment of tax law changes known as the U.S. Tax Cuts and Jobs Act of 2017. |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 118,600 | $ | 14,735 | $ | 36,742 | $ | — | $ | 170,077 | |||||||||||
Accounts receivable, net | — | 203,546 | 38,753 | 15,960 | — | 258,259 | |||||||||||||||||
Intercompany receivable | — | 89,201 | 156,965 | 70,684 | (316,850 | ) | — | ||||||||||||||||
Finished goods inventories | — | 329,989 | 199,091 | 63,811 | (18,665 | ) | 574,226 | ||||||||||||||||
Prepaid expenses and other current assets | — | 8,483 | 23,987 | 7,926 | — | 40,396 | |||||||||||||||||
Total current assets | — | 749,819 | 433,531 | 195,123 | (335,515 | ) | 1,042,958 | ||||||||||||||||
Property, plant, and equipment, net | — | 133,765 | 180,914 | 35,758 | — | 350,437 | |||||||||||||||||
Goodwill | — | 136,570 | 45,368 | 45,163 | — | 227,101 | |||||||||||||||||
Tradenames, net | — | 223,073 | 142,619 | — | — | 365,692 | |||||||||||||||||
Customer relationships, net | — | — | 41,820 | 2,691 | — | 44,511 | |||||||||||||||||
Other assets | — | 24,399 | 1,321 | 2,439 | — | 28,159 | |||||||||||||||||
Intercompany long-term receivable | — | — | 541,629 | — | (541,629 | ) | — | ||||||||||||||||
Intercompany long-term note receivable | — | 100,000 | — | — | (100,000 | ) | — | ||||||||||||||||
Investment in subsidiaries | 869,433 | 1,173,415 | 303,368 | — | (2,346,216 | ) | — | ||||||||||||||||
Total assets | $ | 869,433 | $ | 2,541,041 | $ | 1,690,570 | $ | 281,174 | $ | (3,323,360 | ) | $ | 2,058,858 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||
Accounts payable | $ | — | $ | 137,524 | $ | 44,066 | $ | 17,486 | $ | — | $ | 199,076 | |||||||||||
Intercompany Liabilities | — | 220,033 | 93,790 | 3,027 | (316,850 | ) | — | ||||||||||||||||
Other current liabilities | — | 35,311 | 78,595 | 14,439 | — | 128,345 | |||||||||||||||||
Total current liabilities | — | 392,868 | 216,451 | 34,952 | (316,850 | ) | 327,421 | ||||||||||||||||
Long-term debt, net | — | 593,264 | — | — | — | 593,264 | |||||||||||||||||
Deferred income taxes | — | 46,640 | 40,327 | 380 | — | 87,347 | |||||||||||||||||
Intercompany long-term liability | — | 541,629 | — | — | (541,629 | ) | — | ||||||||||||||||
Intercompany long-term note payable | — | — | 100,000 | — | (100,000 | ) | — | ||||||||||||||||
Other long-term liabilities | — | 78,542 | 91,218 | 11,633 | — | 181,393 | |||||||||||||||||
Stockholders' equity | 869,433 | 888,098 | 1,242,574 | 234,209 | (2,364,881 | ) | 869,433 | ||||||||||||||||
Total liabilities and stockholders' equity | $ | 869,433 | $ | 2,541,041 | $ | 1,690,570 | $ | 281,174 | $ | (3,323,360 | ) | $ | 2,058,858 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 129,463 | $ | 10,030 | $ | 39,001 | $ | — | $ | 178,494 | |||||||||||
Accounts receivable, net | — | 182,944 | 40,286 | 17,331 | — | 240,561 | |||||||||||||||||
Intercompany receivable | — | 87,702 | 162,007 | 58,980 | (308,689 | ) | — | ||||||||||||||||
Finished goods inventories | — | 296,065 | 206,556 | 66,569 | (20,468 | ) | 548,722 | ||||||||||||||||
Prepaid expenses and other current assets | — | 17,012 | 21,354 | 14,569 | — | 52,935 | |||||||||||||||||
Total current assets | — | 713,186 | 440,233 | 196,450 | (329,157 | ) | 1,020,712 | ||||||||||||||||
Property, plant, and equipment, net | — | 147,858 | 189,511 | 40,555 | — | 377,924 | |||||||||||||||||
Goodwill | — | 136,570 | 45,368 | 48,486 | — | 230,424 | |||||||||||||||||
Tradenames, net | — | 223,251 | 142,300 | — | — | 365,551 | |||||||||||||||||
Customer relationships, net | — | — | 44,996 | 3,000 | — | 47,996 | |||||||||||||||||
Other assets | — | 23,884 | 2,392 | 2,159 | — | 28,435 | |||||||||||||||||
Intercompany long-term receivable | — | — | 441,294 | — | (441,294 | ) | — | ||||||||||||||||
Intercompany long-term note receivable | — | 100,000 | — | — | (100,000 | ) | — | ||||||||||||||||
Investment in subsidiaries | 857,416 | 1,053,224 | 231,994 | — | (2,142,634 | ) | — | ||||||||||||||||
Total assets | $ | 857,416 | $ | 2,397,973 | $ | 1,538,088 | $ | 290,650 | $ | (3,013,085 | ) | $ | 2,071,042 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||
Accounts payable | $ | — | $ | 115,658 | $ | 49,313 | $ | 17,143 | $ | — | $ | 182,114 | |||||||||||
Intercompany payables | — | 215,573 | 91,697 | 1,419 | (308,689 | ) | — | ||||||||||||||||
Other current liabilities | — | 11,805 | 122,989 | 14,340 | — | 149,134 | |||||||||||||||||
Total current liabilities | — | 343,036 | 263,999 | 32,902 | (308,689 | ) | 331,248 | ||||||||||||||||
Long-term debt | — | 617,306 | — | — | — | 617,306 | |||||||||||||||||
Deferred income taxes | — | 46,619 | 37,647 | 678 | — | 84,944 | |||||||||||||||||
Intercompany long-term liability | — | 441,294 | — | — | (441,294 | ) | — | ||||||||||||||||
Intercompany long-term note payable | — | — | 100,000 | — | (100,000 | ) | — | ||||||||||||||||
Other long-term liabilities | — | 71,834 | 92,570 | 15,724 | — | 180,128 | |||||||||||||||||
Stockholders' equity | 857,416 | 877,884 | 1,043,872 | 241,346 | (2,163,102 | ) | 857,416 | ||||||||||||||||
Total liabilities and stockholders' equity | $ | 857,416 | $ | 2,397,973 | $ | 1,538,088 | $ | 290,650 | $ | (3,013,085 | ) | $ | 2,071,042 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net sales | $ | — | $ | 1,936,576 | $ | 2,039,889 | $ | 431,745 | $ | (945,941 | ) | $ | 3,462,269 | ||||||||||
Cost of goods sold | — | 1,458,934 | 1,217,110 | 213,462 | (924,720 | ) | 1,964,786 | ||||||||||||||||
Gross profit | — | 477,642 | 822,779 | 218,283 | (21,221 | ) | 1,497,483 | ||||||||||||||||
Royalty income, net | — | 32,958 | 18,652 | — | (12,680 | ) | 38,930 | ||||||||||||||||
Selling, general, and administrative expenses | — | 191,068 | 856,665 | 132,951 | (35,704 | ) | 1,144,980 | ||||||||||||||||
Operating income (loss) | — | 319,532 | (15,234 | ) | 85,332 | 1,803 | 391,433 | ||||||||||||||||
Interest expense | — | 34,523 | 5,310 | 44 | (5,308 | ) | 34,569 | ||||||||||||||||
Interest income | — | (5,329 | ) | (2 | ) | (504 | ) | 5,308 | (527 | ) | |||||||||||||
(Income) loss in subsidiaries | (282,068 | ) | (38,528 | ) | (71,671 | ) | — | 392,267 | — | ||||||||||||||
Other expense (income), net | — | 495 | (189 | ) | 1,110 | — | 1,416 | ||||||||||||||||
Income (loss) before income taxes | 282,068 | 328,371 | 51,318 | 84,682 | (390,464 | ) | 355,975 | ||||||||||||||||
Provision for income taxes | — | 48,106 | 12,790 | 13,011 | — | 73,907 | |||||||||||||||||
Net income (loss) | $ | 282,068 | $ | 280,265 | $ | 38,528 | $ | 71,671 | $ | (390,464 | ) | $ | 282,068 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net sales | $ | — | $ | 1,922,930 | $ | 1,955,703 | $ | 372,314 | $ | (850,443 | ) | $ | 3,400,504 | ||||||||||
Cost of goods sold | — | 1,406,517 | 1,143,867 | 196,391 | (829,625 | ) | 1,917,150 | ||||||||||||||||
Gross profit | — | 516,413 | 811,836 | 175,923 | (20,818 | ) | 1,483,354 | ||||||||||||||||
Royalty income, net | — | 34,816 | 19,725 | — | (11,360 | ) | 43,181 | ||||||||||||||||
Selling, general, and administrative expenses | — | 181,129 | 837,252 | 126,057 | (37,510 | ) | 1,106,928 | ||||||||||||||||
Operating income (loss) | — | 370,100 | (5,691 | ) | 49,866 | 5,332 | 419,607 | ||||||||||||||||
Interest expense | — | 29,758 | 5,498 | 96 | (5,308 | ) | 30,044 | ||||||||||||||||
Interest income | — | (5,497 | ) | — | (156 | ) | 5,308 | (345 | ) | ||||||||||||||
(Income) loss in subsidiaries | (302,848 | ) | (25,426 | ) | (38,948 | ) | — | 367,222 | — | ||||||||||||||
Other (income) expense, net | — | (1,154 | ) | 1,281 | (1,291 | ) | — | (1,164 | ) | ||||||||||||||
Income (loss) before income taxes | 302,848 | 372,419 | 26,478 | 51,217 | (361,890 | ) | 391,072 | ||||||||||||||||
Provision for income taxes | — | 74,903 | 1,052 | 12,269 | — | 88,224 | |||||||||||||||||
Net income (loss) | $ | 302,848 | $ | 297,516 | $ | 25,426 | $ | 38,948 | $ | (361,890 | ) | $ | 302,848 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net sales | $ | — | $ | 1,881,918 | $ | 1,762,252 | $ | 300,523 | $ | (746,150 | ) | $ | 3,198,543 | ||||||||||
Cost of goods sold | — | 1,358,209 | 1,033,403 | 155,560 | (727,148 | ) | 1,820,024 | ||||||||||||||||
Gross profit | — | 523,709 | 728,849 | 144,963 | (19,002 | ) | 1,378,519 | ||||||||||||||||
Royalty income, net | — | 32,728 | 19,660 | — | (9,573 | ) | 42,815 | ||||||||||||||||
Selling, general, and administrative expenses | — | 177,605 | 753,874 | 101,494 | (37,567 | ) | 995,406 | ||||||||||||||||
Operating income (loss) | — | 378,832 | (5,365 | ) | 43,469 | 8,992 | 425,928 | ||||||||||||||||
Interest expense | — | 26,475 | 5,435 | 442 | (5,308 | ) | 27,044 | ||||||||||||||||
Interest income | — | (5,756 | ) | — | (115 | ) | 5,308 | (563 | ) | ||||||||||||||
(Income) loss in subsidiaries | (257,709 | ) | 4,808 | (29,308 | ) | — | 282,209 | — | |||||||||||||||
Other (income) expense, net | — | (382 | ) | 482 | 3,907 | — | 4,007 | ||||||||||||||||
Income (loss) before income taxes | 257,709 | 353,687 | 18,026 | 39,235 | (273,217 | ) | 395,440 | ||||||||||||||||
Provision for income taxes | — | 104,970 | 22,834 | 9,927 | — | 137,731 | |||||||||||||||||
Net income (loss) | $ | 257,709 | $ | 248,717 | $ | (4,808 | ) | $ | 29,308 | $ | (273,217 | ) | $ | 257,709 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net income | $ | 282,068 | $ | 280,265 | $ | 38,528 | $ | 71,671 | $ | (390,464 | ) | $ | 282,068 | ||||||||||
Post-retirement benefit plans | (67 | ) | (67 | ) | (282 | ) | — | 349 | (67 | ) | |||||||||||||
Foreign currency translation adjustments | (11,679 | ) | (11,679 | ) | (11,679 | ) | (11,679 | ) | 35,037 | (11,679 | ) | ||||||||||||
Comprehensive income | $ | 270,322 | $ | 268,519 | $ | 26,567 | $ | 59,992 | $ | (355,078 | ) | $ | 270,322 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net income (loss) | $ | 302,848 | $ | 297,516 | $ | 25,426 | $ | 38,948 | $ | (361,890 | ) | $ | 302,848 | ||||||||||
Post-retirement benefit plans | (692 | ) | (692 | ) | (430 | ) | — | 1,122 | (692 | ) | |||||||||||||
Foreign currency translation adjustments | 6,339 | 6,339 | 6,339 | 6,339 | (19,017 | ) | 6,339 | ||||||||||||||||
Comprehensive income (loss) | $ | 308,495 | $ | 303,163 | $ | 31,335 | $ | 45,287 | $ | (379,785 | ) | $ | 308,495 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Net income (loss) | $ | 257,709 | $ | 248,717 | $ | (4,808 | ) | $ | 29,308 | $ | (273,217 | ) | $ | 257,709 | |||||||||
Post-retirement benefit plans | (335 | ) | (335 | ) | (666 | ) | — | 1,001 | (335 | ) | |||||||||||||
Foreign currency translation adjustments | 1,962 | 1,962 | 1,962 | 1,962 | (5,886 | ) | 1,962 | ||||||||||||||||
Comprehensive income (loss) | $ | 259,336 | $ | 250,344 | $ | (3,512 | ) | $ | 31,270 | $ | (278,102 | ) | $ | 259,336 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Cash flows provided by operating activities: | $ | — | $ | 202,214 | $ | 60,391 | $ | 93,593 | $ | — | $ | 356,198 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Capital expenditures | — | (17,589 | ) | (39,657 | ) | (6,537 | ) | — | (63,783 | ) | |||||||||||||
Acquisitions of businesses, net of cash acquired | — | — | — | 96 | — | 96 | |||||||||||||||||
Intercompany investing activity | 272,978 | (815 | ) | 3,024 | 1,558 | (276,745 | ) | — | |||||||||||||||
Disposals and recoveries from property, plant, and equipment | — | — | 370 | 10 | — | 380 | |||||||||||||||||
Net cash provided by (used in) investing activities | $ | 272,978 | $ | (18,404 | ) | $ | (36,263 | ) | $ | (4,873 | ) | $ | (276,745 | ) | $ | (63,307 | ) | ||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Intercompany financing activity | — | (168,705 | ) | (97,945 | ) | (10,095 | ) | 276,745 | — | ||||||||||||||
Borrowings under secured revolving credit facility | — | 290,000 | — | — | — | 290,000 | |||||||||||||||||
Payments on secured revolving credit facility | — | (315,000 | ) | — | — | — | (315,000 | ) | |||||||||||||||
Payment of debt issuance costs | — | (968 | ) | — | — | — | (968 | ) | |||||||||||||||
Dividends paid | (83,717 | ) | — | 78,522 | (78,522 | ) | — | (83,717 | ) | ||||||||||||||
Repurchases of common stock | (193,028 | ) | — | — | — | — | (193,028 | ) | |||||||||||||||
Withholdings from vesting of restricted stock | (6,830 | ) | — | — | — | — | (6,830 | ) | |||||||||||||||
Proceeds from exercises of stock options | 10,597 | — | — | — | — | 10,597 | |||||||||||||||||
Net cash (used in) provided by financing activities | (272,978 | ) | (194,673 | ) | (19,423 | ) | (88,617 | ) | 276,745 | (298,946 | ) | ||||||||||||
Effect of exchange rate changes on cash | — | — | — | (2,362 | ) | — | (2,362 | ) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (10,863 | ) | 4,705 | (2,259 | ) | — | (8,417 | ) | ||||||||||||||
Cash and cash equivalents, beginning of fiscal year | — | 129,463 | 10,030 | 39,001 | — | 178,494 | |||||||||||||||||
Cash and cash equivalents, end of fiscal year | $ | — | $ | 118,600 | $ | 14,735 | $ | 36,742 | $ | — | $ | 170,077 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Cash flows provided by operating activities: | $ | — | $ | 167,000 | $ | 118,814 | $ | 43,807 | $ | — | $ | 329,621 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Capital expenditures | — | (21,690 | ) | (38,899 | ) | (8,884 | ) | — | (69,473 | ) | |||||||||||||
Acquisitions of businesses, net of cash acquired | — | (143,270 | ) | 746 | (15,933 | ) | — | (158,457 | ) | ||||||||||||||
Intercompany investing activity | 256,991 | (25,606 | ) | 894 | 27,397 | (259,676 | ) | — | |||||||||||||||
Disposals and recoveries from property, plant, and equipment | — | — | 15 | — | — | 15 | |||||||||||||||||
Net cash provided by (used in) investing activities | $ | 256,991 | $ | (190,566 | ) | $ | (37,244 | ) | $ | 2,580 | $ | (259,676 | ) | $ | (227,915 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Intercompany financing activity | — | (128,908 | ) | (83,357 | ) | (47,411 | ) | 259,676 | — | ||||||||||||||
Borrowings under secured revolving credit facility | — | 200,000 | — | — | — | 200,000 | |||||||||||||||||
Payments on secured revolving credit facility | — | (145,000 | ) | — | (18,965 | ) | — | (163,965 | ) | ||||||||||||||
Payment of debt issuance costs | — | (2,119 | ) | — | — | — | (2,119 | ) | |||||||||||||||
Dividends paid | (70,914 | ) | — | — | — | — | (70,914 | ) | |||||||||||||||
Repurchases of common stock | (188,762 | ) | — | — | — | — | (188,762 | ) | |||||||||||||||
Withholdings from vesting of restricted stock | (5,753 | ) | — | — | — | — | (5,753 | ) | |||||||||||||||
Proceeds from exercises of stock options | 8,438 | — | — | — | — | 8,438 | |||||||||||||||||
Net cash (used in) provided by financing activities | (256,991 | ) | (76,027 | ) | (83,357 | ) | (66,376 | ) | 259,676 | (223,075 | ) | ||||||||||||
Effect of exchange rate changes on cash | — | — | — | 505 | — | 505 | |||||||||||||||||
Net (decrease) increase in cash and cash equivalents | — | (99,593 | ) | (1,787 | ) | (19,484 | ) | — | (120,864 | ) | |||||||||||||
Cash and cash equivalents, beginning of fiscal year | — | 229,056 | 11,817 | 58,485 | — | 299,358 | |||||||||||||||||
Cash and cash equivalents, end of fiscal year | $ | — | $ | 129,463 | $ | 10,030 | $ | 39,001 | $ | — | $ | 178,494 |
Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Cash flows provided by operating activities: | $ | — | $ | 206,841 | $ | 127,018 | $ | 35,370 | $ | — | $ | 369,229 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||
Capital expenditures | — | (22,934 | ) | (55,072 | ) | (10,550 | ) | — | (88,556 | ) | |||||||||||||
Intercompany investing activity | 368,307 | 480 | (2,118 | ) | 131 | (366,800 | ) | — | |||||||||||||||
Disposals and recoveries from property, plant, and equipment | — | 23 | — | 193 | — | 216 | |||||||||||||||||
Net cash provided by (used in) investing activities | $ | 368,307 | $ | (22,431 | ) | $ | (57,190 | ) | $ | (10,226 | ) | $ | (366,800 | ) | (88,340 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||||||||||
Intercompany financing activity | — | (283,907 | ) | (74,681 | ) | (8,212 | ) | 366,800 | — | ||||||||||||||
Dividends paid | (66,355 | ) | — | — | — | — | (66,355 | ) | |||||||||||||||
Repurchases of common stock | (300,445 | ) | — | — | — | — | (300,445 | ) | |||||||||||||||
Income tax benefit from stock-based compensation | — | 2,782 | 2,018 | — | — | 4,800 | |||||||||||||||||
Withholdings from vesting of restricted stock | (8,673 | ) | — | — | — | — | (8,673 | ) | |||||||||||||||
Proceeds from exercises of stock options | 7,166 | — | — | — | — | 7,166 | |||||||||||||||||
Net cash (used in) provided by financing activities | (368,307 | ) | (281,125 | ) | (72,663 | ) | (8,212 | ) | 366,800 | (363,507 | ) | ||||||||||||
Effect of exchange rate changes on cash | — | — | — | 767 | — | 767 | |||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (96,715 | ) | (2,835 | ) | 17,699 | — | (81,851 | ) | ||||||||||||||
Cash and cash equivalents, beginning of fiscal year | — | 325,771 | 14,652 | 40,786 | — | 381,209 | |||||||||||||||||
Cash and cash equivalents, end of fiscal year | $ | — | $ | 229,056 | $ | 11,817 | $ | 58,485 | $ | — | $ | 299,358 |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | ||||||
Equity compensation plans approved by security holders(*) | 1,447,141 | $ | 74.55 | 3,702,701 | |||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 1,447,141 | $ | 74.55 | 3,702,701 |
(*) | Represents stock options that are outstanding or that are available for future issuance pursuant to the Carter's, Inc. Amended and Restated Equity Incentive Plan. |
Page | |||
(A) | 1. | ||
Consolidated Balance Sheets at December 29, 2018 and December 30, 2017 | |||
Consolidated Statements of Operations for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |||
Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |||
Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |||
Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 | |||
2. | Financial Statement Schedules: None | ||
(B) | Exhibits: |
Exhibit Number | Description of Exhibits |
3.1 | |
3.2 | |
4.1 | |
4.2 | |
4.2.1 | |
4.2.2 | |
10.1 | |
10.1.1 | |
10.2 * | |
10.3 * |
10.4 * | |
10.5 * | |
10.6 * | |
10.7 | |
10.8 | |
10.8.1 | |
21 | |
23 | |
31.1 | |
31.2 | |
32 | |
101 | Interactive Data File |
CARTER'S, INC. |
/s/ MICHAEL D. CASEY |
Michael D. Casey |
Chief Executive Officer |
Name | Title | Date |
/s/ MICHAEL D. CASEY | Chairman and Chief Executive Officer | February 25, 2019 |
Michael D. Casey | (Principal Executive Officer) | |
/s/ RICHARD F. WESTENBERGER | Executive Vice President and Chief Financial Officer | February 25, 2019 |
Richard F. Westenberger | (Principal Financial and Accounting Officer) | |
/s/ AMY WOODS BRINKLEY | Director | February 25, 2019 |
Amy Woods Brinkley | ||
/s/ GIUSEPPINA BUONFANTINO | Director | February 25, 2019 |
Giuseppina Buonfantino | ||
/s/ A. BRUCE CLEVERLY | Director | February 25, 2019 |
A. Bruce Cleverly | ||
/s/ JEVIN S. EAGLE | Director | February 25, 2019 |
Jevin S. Eagle |
/s/ MARK P. HIPP | Director | February 25, 2019 |
Mark P. Hipp | ||
/s/ WILLIAM J. MONTGORIS | Director | February 25, 2019 |
William J. Montgoris | ||
/s/ DAVID PULVER | Director | February 25, 2019 |
David Pulver | ||
1. | I have reviewed this annual report on Form 10-K of Carter’s, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
February 25, 2019 | /s/ MICHAEL D. CASEY |
Michael D. Casey | |
Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Carter’s, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
February 25, 2019 | /s/ RICHARD F. WESTENBERGER |
Richard F. Westenberger | |
Chief Financial Officer |
February 25, 2019 | /s/ MICHAEL D. CASEY |
Michael D. Casey | |
Chief Executive Officer |
February 25, 2019 | /s/ RICHARD F. WESTENBERGER |
Richard F. Westenberger | |
Chief Financial Officer |
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Feb. 19, 2019 |
Jun. 30, 2018 |
|
Document Information [Abstract] | |||
Entity Registrant Name | CARTERS INC | ||
Entity Central Index Key | 0001060822 | ||
Current Fiscal Year End Date | --12-29 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 29, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 45,526,000 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 4,867,389,196 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock; par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock; shares authorized | 100,000 | 100,000 |
Preferred stock; issued | 0 | 0 |
Preferred stock; outstanding | 0 | 0 |
Common stock, voting; par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, voting; shares authorized | 150,000,000 | 150,000,000 |
Common stock voting; shares issued | 45,629,014 | 47,178,346 |
Common stock voting; shares outstanding | 45,629,014 | 47,178,346 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Apr. 02, 2016 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Net sales | $ 1,086,379 | $ 923,907 | $ 696,197 | $ 755,786 | $ 1,027,880 | $ 948,046 | $ 691,751 | $ 732,827 | $ 3,462,269 | $ 3,400,504 | $ 3,198,543 | |
Cost of goods sold | 1,964,786 | 1,917,150 | 1,820,024 | |||||||||
Gross profit | 467,598 | 387,450 | 309,958 | 332,477 | 460,837 | 403,578 | 303,247 | 315,692 | 1,497,483 | 1,483,354 | 1,378,519 | |
Royalty income, net | 1,086,379 | 923,907 | 696,197 | 755,786 | 1,027,880 | 948,046 | 691,751 | 732,827 | 3,462,269 | 3,400,504 | 3,198,543 | |
Selling, general, and administrative expenses | 307,358 | 294,117 | 263,343 | 280,162 | 325,508 | 283,480 | 250,146 | 247,794 | 1,144,980 | 1,106,928 | 995,406 | |
Operating income | 170,597 | 103,557 | 56,970 | 60,309 | 146,392 | 130,448 | 64,311 | 78,456 | 391,433 | 419,607 | 425,928 | |
Interest expense | 34,569 | 30,044 | 27,044 | |||||||||
Interest income | (527) | (345) | (563) | |||||||||
Other (income) expense, net | 1,416 | (1,164) | 4,007 | |||||||||
Income before income taxes | 355,975 | 391,072 | 395,440 | |||||||||
Provision for income taxes | 73,907 | 88,224 | 137,731 | |||||||||
Net income | $ 130,561 | $ 71,770 | $ 37,268 | $ 42,469 | $ 136,144 | $ 82,316 | $ 37,793 | $ 46,595 | $ 282,068 | $ 302,848 | $ 257,709 | |
Basic net income per common share | $ 2.85 | $ 1.55 | $ 0.80 | $ 0.90 | $ 2.88 | $ 1.73 | $ 0.78 | $ 0.96 | $ 6.06 | $ 6.31 | $ 5.12 | |
Diluted net income per common share | 2.83 | 1.53 | 0.79 | 0.89 | $ 2.85 | $ 1.71 | $ 0.77 | 0.95 | 6.00 | 6.24 | 5.08 | |
Dividend declared and paid per common share | $ 0.45 | $ 0.45 | $ 0.45 | $ 0.45 | $ 0.37 | $ 1.80 | $ 1.48 | $ 1.32 | ||||
Royalty [Member] | ||||||||||||
Net sales | $ 10,357 | $ 10,224 | $ 10,355 | $ 7,994 | $ 11,063 | $ 10,350 | $ 11,210 | $ 10,558 | $ 42,815 | $ 38,930 | $ 43,181 | $ 42,815 |
Royalty income, net | $ 10,357 | $ 10,224 | $ 10,355 | $ 7,994 | $ 11,063 | $ 10,350 | $ 11,210 | $ 10,558 | $ 42,815 | $ 38,930 | $ 43,181 | $ 42,815 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 282,068 | $ 302,848 | $ 257,709 |
Other comprehensive income: | |||
Unrealized loss on OshKosh defined benefit plan, net of tax benefit of $80, $140, and $400 for the fiscal years 2018, 2017, and 2016, respectively | (281) | (430) | (666) |
Unrealized gain (loss) on Carter's post-retirement benefit obligation, net of (tax) or tax benefit of ($70), $70, and ($200) for fiscal years 2018, 2017, and 2016, respectively | 214 | (262) | 331 |
Foreign currency translation adjustments | (11,679) | 6,339 | 1,962 |
Total other comprehensive income | (11,746) | 5,647 | 1,627 |
Comprehensive income | $ 270,322 | $ 308,495 | $ 259,336 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Pension Plans | |||
Unrealized gain (loss) on OshKosh defined benefit and postretirement plans, tax | $ 80 | $ 140 | $ 400 |
Postretirement Benefit | |||
Unrealized gain (loss) on OshKosh defined benefit and postretirement plans, tax | $ (70) | $ 70 | $ (200) |
THE COMPANY |
12 Months Ended |
---|---|
Dec. 29, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
THE COMPANY | THE COMPANY Carter's, Inc. and its wholly owned subsidiaries (collectively, the "Company") design, source, and market branded childrenswear under the Carter’s, Child of Mine, Just One You, Precious Firsts, Precious Baby, Simple Joys, OshKosh B'gosh ("OshKosh"), Skip Hop, and other brands. The Company's products are sourced through contractual arrangements with manufacturers worldwide for: 1) wholesale distribution to leading department stores, national chains, and specialty retailers domestically and internationally and 2) distribution to the Company's own retail stores and eCommerce sites that market its brand name merchandise and other licensed products manufactured by other companies. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of Carter's, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Fiscal Year The Company's fiscal year ends on the Saturday in December or January nearest the last day of December, resulting in an additional week of results every five or six fiscal years. Fiscal 2018, which ended on December 29, 2018, fiscal 2017, which ended on December 30, 2017, and fiscal 2016, which ended on December 31, 2016, all contained 52 weeks. Use of Estimates in the Preparation of the Consolidated Financial Statements The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As disclosed in Note 2, Significant Accounting Policies, and Note 3, Revenue Recognition, at the beginning of fiscal 2018 the Company adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers, and related amendments (“ASC 606”) using the full retrospective adoption method. The full retrospective method required the Company to apply the standard to the financial statements for the period of adoption as well as to each prior reporting period presented. Foreign Currency Translation and Transactions Translation adjustments The functional currency of substantially all of the Company's foreign operations is the local currency in each foreign country. Assets and liabilities are translated into U.S. dollars using the current exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the average exchange rates for the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within the accompanying consolidated balance sheet. Transaction adjustments The Company also recognizes gains and losses on transactions that are denominated in a currency other than the respective entity's functional currency. Foreign currency transaction gains and losses also include intercompany loans with foreign subsidiaries that are of a short-term nature. Foreign currency transaction gains and losses are recognized in earnings, as a separate component of other expense, net, within the consolidated statements of operations. Foreign Currency Contracts As part of the Company's overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, primarily between the U.S. dollar and the currencies of Canada and Mexico, the Company may use foreign currency forward contracts to hedge purchases that are made in U.S. dollars, primarily for inventory purchases in its Canadian and Mexican operations. As part of this hedging strategy, the Company may use foreign currency forward exchange contracts with maturities of less than 12 months to provide continuing coverage throughout the hedging period. Historically, these contracts were not designated for hedge accounting treatment, and therefore changes in the fair value of these contracts have been recorded in Other (income) expense, net in the Company's consolidated statement of operations. Such foreign currency gains and losses typically include the mark-to-market fair value adjustments at the end of each reporting period related to open contracts, as well as any realized gains and losses on contracts settled during the reporting period. The fair values of any unsettled currency contracts are included in other current assets or other current liabilities on the Company's consolidated balance sheet. On the consolidated statement of cash flows, the Company includes all activity, including cash settlement of any contracts, as a component of cash flows from operations. Cash and Cash Equivalents The Company considers all highly liquid investments that have original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of deposit accounts and cash management funds invested in U. S. government instruments. These investments are stated at cost, which approximates fair value. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions; these amounts typically settle in less than five days. Concentration of cash deposits risk As of December 29, 2018, the Company had approximately $170.1 million of cash and cash equivalents in major financial institutions, including approximately $36.7 million in financial institutions located outside of the United States. The Company maintains cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the U.S. and by similar insurers for deposits located outside the U.S. To mitigate this risk, the Company utilizes a policy of allocating cash deposits among major financial institutions that have been evaluated by the Company and third-party rating agencies as having acceptable risk profiles. Accounts Receivable Concentration of credit risk In fiscal 2018, 2017, and 2016, no one customer accounted for 10% or more of the Company's consolidated net sales. At December 29, 2018, three wholesale customers each had individual receivable balances in excess of 10% of gross accounts receivable, and the total receivable balances due from these three wholesale customers in the aggregate equaled approximately 40% of total gross trade receivables outstanding. At December 30, 2017, two wholesale customers each had individual receivable balances in excess of 10% of gross accounts receivable, and the total receivable balances due from these two wholesale customers in the aggregate equaled approximately 28% of total gross accounts receivable outstanding. Valuation Accounts for Wholesale Accounts Receivable Accounts receivable reserves The Company's accounts receivable reserves for wholesale customers include an allowance for doubtful accounts and an allowance for chargebacks. The allowance for doubtful accounts includes estimated losses resulting from the inability of its customers to make payments. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, an additional allowance could be required. Past due balances over 90 days are reviewed individually for collectibility. The Company's credit and collections department reviews all other balances regularly. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. Provisions for the allowance for doubtful accounts are reflected in Selling, general and administrative expenses on the consolidated statement of operations and provisions for chargebacks are reflected as a reduction in Net sales on the consolidated statement of operations. Sales returns reserves Except in very limited instances, the Company does not allow its wholesale customers to return goods to the Company. Inventories Inventories, which consist primarily of finished goods, are stated approximately at the lower of cost (first-in, first-out basis for wholesale inventory and average cost for retail inventories) or net realizable value. Obsolete, damaged, and excess inventory is carried at net realizable value by establishing reserves after assessing historical recovery rates, current market conditions, and future marketing and sales plans. Rebates, discounts, and other cash consideration received from a vendor related to inventory purchases are reflected as reductions in the cost of the related inventory item, and are therefore reflected in cost of sales when the related inventory item is sold. Property, Plant, and Equipment Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. When fixed assets are sold or otherwise disposed of, the accounts are relieved of the original cost of the assets and the related accumulated depreciation or amortization and any resulting profit or loss is credited or charged to income. For financial reporting purposes, depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements from 15 to 26 years, retail store fixtures, equipment, and computers from 3 to 10 years. Leasehold improvements and fixed assets purchased under capital lease are amortized over the lesser of the asset life or related lease term. The Company capitalizes the cost of its fixtures designed and purchased for use at major wholesale accounts. The cost of these fixtures is amortized over 3 years. Internal-Use Software The Company purchases software licenses from external vendors and also develops software internally using Company employees and consultants. Software license costs, including certain costs to internally develop software, that meet the applicable criteria are capitalized while all other costs are expensed as incurred. Capitalized software is depreciated or amortized on the straight-line method over its estimated useful lives, from 3 to 10 years. If a software application does not include a purchased license for the software, such as a cloud-based software application, the arrangement is accounted for as a service contract. Goodwill and Other Intangible Assets Annual impairment reviews The carrying values of the goodwill and indefinite-lived tradename assets are subject to annual impairment reviews which are performed as of the last day of each fiscal year. Additionally, a review for potential impairment is performed whenever significant events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Significant assumptions in the impairment models include estimates of future cash flows, discount rates, and, in the case of tradenames, royalty rates. Goodwill The Company performs impairment tests of its goodwill at the reporting unit level. Qualitative and quantitative methods are used to assess for impairment, including the use of discounted cash flows ("income approach") and relevant data from guideline public companies ("market approach"). Under a qualitative assessment, the Company determines if it is "more likely than not" that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, but are not limited to: macroeconomic conditions, industry and market considerations, cost factors that may have a negative effect on earnings, overall financial performance, and other relevant entity-specific events. If the Company determines that it is "more likely than not" that the fair value of the reporting unit is less than its carrying value, then the Company performs the two-step goodwill impairment test as required. If it is determined that it is "not likely" that the fair value of the reporting unit is less than its carrying value, then no further testing is required and the Company documents the relevant qualitative factors that support the strength in the fair value. The first step of a quantitative assessment is to compare the fair value of the reporting unit to its carrying value, including goodwill. The Company uses a discounted cash flow model to determine the fair value, using assumptions consistent with those of hypothetical marketplace participants. If the fair value of a reporting unit is less than its carrying value, the second step of the impairment test must be performed. The second step compares the implied fair value of the reporting unit goodwill with the carrying value of that goodwill, in order to determine the amount of the impairment loss and charge to the consolidated statement of operations. Indefinite-lived tradenames For indefinite-lived tradenames, the Company may utilize a qualitative assessment, as described above, to determine whether the fair value of an indefinite-lived asset is less than its carrying value. If a quantitative assessment is necessary, the Company determines fair value using a discounted cash flow model that uses the relief-from-royalty method. If the carrying amount exceeds the fair value of the tradename, an impairment charge is recognized in the amount of the excess. Impairment of Other Long-Lived Assets The Company reviews other long-lived assets, including property, plant, and equipment, and licensing agreements, for impairment whenever events or changes in circumstances indicate that the carrying amount of such an asset may not be recoverable. Management will determine whether there has been a permanent impairment on such assets held for use in the business by comparing anticipated undiscounted future cash flows from the use and eventual disposition of the asset or asset group to the carrying value of the asset. The amount of any resulting impairment will be calculated by comparing the carrying value to fair value, which may be estimated using the present value of the same cash flows. Long-lived assets that meet the definition of held for sale will be valued at the lower of carrying amount or fair value, less costs to sell. Deferred Debt Issuance Costs Debt issuance costs associated with the Company's secured revolving credit facility and senior term notes are deferred and amortized to interest expense over the term of the related debt using the effective interest method. Debt issuance costs associated with Company's senior notes are presented on the Company's consolidated balance sheet as a direct reduction in the carrying value of the associated debt liability. Fees paid to lenders by the Company to obtain its secured revolving credit facility are included within Other assets on the Company's consolidated balance sheet and classified as either current or non-current based on the expiration date of the credit facility. Fair Value Measurements The fair value framework requires the Company to categorize certain assets and liabilities into three levels, based upon the assumptions used to price those assets or liabilities. The three levels are defined as follows:
The Company measures its pension assets, deferred compensation plan investment assets, and any unsettled foreign currency forward contracts at fair value. The Company's cash and cash equivalents, accounts receivable, and accounts payable are short-term in nature. As such, their carrying value approximates fair value. The carrying values of the Company’s outstanding borrowings are not required to be remeasured and adjusted to the then-current fair values at the end of each reporting period. Instead, the fair values of the Company's outstanding borrowings are disclosed at the end of each reporting period in Note 8, Long-Term Debt, to the consolidated financial statements. Had the Company been required to remeasure and adjust the carrying values of its outstanding borrowings to fair value at the end of each reporting period, such fair value measurements would have been disclosed as a Level 2 liability in the fair value hierarchy. Revenue Recognition At the beginning of fiscal 2018, the Company adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and all related amendments (“ASC 606”) using the full retrospective adoption method. Refer to Note 3, Revenue Recognition, for additional information. The Company uses the five-step model to recognize revenue:
Performance Obligations The Company identifies each distinct performance obligation to transfer goods (or bundle of goods). The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods to the customer. Other than inbound and outbound freight and shipping arrangements, the Company does not use third parties to satisfy its performance obligations in revenue arrangements with customers. When Performance Obligations Are Satisfied Wholesale Revenues - The Company typically transfers control upon shipment. However, in certain arrangements where the Company retains the risk of loss during shipment, satisfaction of the performance obligation occurs when the goods reach the customer. Retail Revenues - For transactions in stores, the Company satisfies its performance obligation at point of sale when the customer takes possession of the goods and tenders payment. The redemption of loyalty points under the Company's rewards program and redemptions of gift cards may be part of a transaction. For purchases made through the Company’s eCommerce channel, revenue is recognized when the goods are physically delivered to the customer. The Company satisfies its performance obligations with licensees over time as customers have the right to use the intellectual property over the contract period. Significant Payment Terms Retail customers tender a form of payment, such as cash or a credit/debit card, at point of sale. For wholesale customers and licensees, payment is due based on established terms. Returns and Refunds The Company establishes return provisions for retail customers. It is the Company's policy not to accept returns from wholesale customers. Significant Judgments Sale of Goods - The Company relies on shipping terms to determine when performance obligations are satisfied. When goods are shipped to wholesale customers “FOB Shipping Point,” control of the goods is transferred to the customer at the time of shipment if there are no remaining performance obligations. The Company recognizes the revenue once control passes to the customer. For retail transactions, no significant judgments are involved since revenue is recognized at the point of sale when tender is exchanged and the customer receives the goods. Royalty Revenues - The Company transfers the right-to-use benefit to the licensee for the contract term and therefore the Company satisfies its performance obligation over time. Revenue recognized for each reporting period is based on the greater of: 1) the royalties owed on actual net sales by the licensee and 2) a minimum royalty guarantee, if applicable. Transaction Price - The transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimation into the determination of the transaction price. The Company may offer sales incentives to wholesale and retail customers, including discounts. For retail transactions, the Company has significant experience with return patterns and relies on this experience to estimate expected returns when determining the transaction price. Standalone Selling Prices - For arrangements that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone selling price basis. Costs Incurred to Obtain a Contract - Incremental costs to obtain contracts are not material to the Company. Policy Elections In addition to those previously disclosed, the Company has made the following accounting policy elections and practical expedients:
The Company records its cooperative advertising arrangements with certain of its major wholesale customers at fair value. Fair value is determined based upon, among other factors, comparable market analysis for similar advertisements. The Company has included the fair value of these arrangements of approximately $3.0 million for fiscal 2018, $3.1 million for fiscal 2017, and $3.7 million for fiscal 2016 as a component of Selling, general, and administrative expenses on the accompanying consolidated statements of operations, rather than as a reduction of net sales. Amounts determined to be in excess of the fair value of these arrangements are recorded as a reduction of Net sales. Costs of Goods Sold and Selling, General and Administrative Expenses In addition to the cost of product, cost of goods sold includes expenses related to the merchandising, design, and procurement of product. Also included are outbound shipping costs incurred in the eCommerce channel related to delivery of product to the end consumer. Generally, all other expenses, excluding interest and income taxes, are included in selling, general and administrative ("SG&A") expenses, including distribution expenses. Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities and delivery to our wholesale customers and to our retail stores. Distribution expenses included in SG&A totaled $188.9 million, $173.5 million, and $153.7 million for fiscal years 2018, 2017, and 2016, respectively. Definitions of gross profit and gross margin very across the industry and as such, our metrics may not be comparable to other companies. Income From Royalties and License Fees The Company licenses the Carter's, Child of Mine, Just One You, Precious Firsts, Precious Baby, Carter's little baby basics, and Simple Joys trademarks to other companies for use on baby and young children's products, including bedding, outerwear, sleepwear, shoes, underwear, socks, room décor, toys, stationery, hair accessories, furniture, and related products. These royalties are recorded as earned, based upon the sales of licensed products by licensees and reported as royalty income in the statements of operations. Advertising Expenses Costs associated with the production of advertising, such as writing, copy, printing, and other costs, are expensed as incurred. Costs associated with communicating advertising that has been produced, such as magazine costs and eCommerce site banners, are expensed when the advertising event takes place. Stock-Based Compensation Arrangements The Company recognizes the cost resulting from all stock-based payment transactions in the financial statements at grant date fair value. Stock-based compensation expense is recognized over the requisite service period, net of estimated forfeitures. During the requisite service period, the Company also recognizes a deferred income tax benefit for the expense recognized for U.S. GAAP. At time of subsequent vesting, exercise, forfeiture, or expiration of an award, the difference between the Company's actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in income tax expense/benefit during the current period. Stock Options The Company determines the fair value of stock options using the Black-Scholes option pricing model, which requires the use of the following subjective assumptions:
Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation expense and the related amount recognized in the consolidated statements of operations. Time-Based Restricted Stock Awards The fair value of time-based restricted stock awards is determined based on the quoted closing price of the Company's common stock on the date of grant and is recognized as compensation expense over the vesting term of the awards, net of estimated forfeitures. Performance-Based Restricted Stock Awards The Company accounts for its performance-based restricted stock awards based on the quoted closing price of the Company's common stock on the date of grant and records stock-based compensation expense over the vesting term of the awards based on the probability that the performance criteria will be achieved, net of estimated forfeitures. The Company reassesses the probability of vesting at each reporting period and adjusts stock-based compensation expense based on its probability assessment. Stock Awards The fair value of stock granted to non-management board members is determined based on the quoted closing price of the Company's common stock on the date of grant. The Company records the stock-based compensation expense immediately as there are no vesting terms. Income Taxes The accompanying consolidated financial statements reflect current and deferred tax provisions, in accordance with ASC 740, Income Taxes. The deferred tax provision is determined under the liability method. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using presently enacted tax rates. Valuation allowances are established when it is "more likely than not" that a deferred tax asset will not be recovered. The provision for income taxes is the sum of the amount of income taxes paid or payable for the year as determined by applying the provisions of enacted tax laws to the taxable income for that year, the net change during the year in deferred tax assets and liabilities, and the net change during the year in any valuation allowances. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. A company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. If it is more likely than not that a tax position would not be sustained, then no tax benefit would be recognized. Where applicable, associated interest and penalties are also recorded. Interest is recorded as a component of interest expense and penalties, if any, are recorded within the provision for incomes taxes in the consolidated statements of operations and are classified on the consolidated balance sheets with the related liability for uncertain tax contingency liabilities. For current and deferred tax provisions, ASC 740 requires an entity to account for the effects of new income tax legislation in the same reporting period that the tax legislation is enacted. Recent tax law changes known as the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 Act") were enacted in the United States on December 22, 2017. The 2017 Act, among other things, reduces the United States federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax ("toll tax") on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. For the 2017 Act, SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, permitted the Company to calculate and recognize provisional estimates during the period of enactment (fourth quarter of fiscal 2017) for the accounting of the 2017 Act. Subsequent adjustments to provisional estimates were reflected in the Company's income tax provisions/benefits during fiscal 2018. See Note 12, Income Taxes, to the consolidated financial statements. Supplemental Cash Flow Information Interest paid in cash approximated $33.6 million, $28.3 million, and $25.4 million for fiscal years 2018, 2017, and 2016, respectively. Income taxes paid in cash approximated $55.9 million, $132.9 million and $120.6 million for fiscal years 2018, 2017, and 2016, respectively. Additions to property, plant and equipment of approximately $1.9 million, $1.9 million, and $2.6 million were excluded from capital expenditures on the Company's consolidated statements of cash flows for fiscal years 2018, 2017, and 2016, respectively, since these amounts were accrued and unpaid at the end of each respective fiscal year. Earnings Per Share The Company calculates basic and diluted net income per common share under the two-class method for unvested share-based payment awards that contain participating rights to dividends or dividend equivalents (whether paid or unpaid). Basic net income per share is calculated by dividing net income for the period by the weighted-average common shares outstanding for the period. Diluted net income per share includes the effect of dilutive instruments and uses the average share price for the period in determining the number of shares that are to be added to the weighted-average number of shares outstanding. Open Market Repurchases of Common Stock Shares of the Company's common stock that are repurchased by the Company through open market transactions are retired. Through the end of fiscal 2018, all such open market repurchases have been at prices that exceeded the par value of the repurchased common stock, and the amounts of the purchase prices that exceeded par value were charged to additional paid-in capital or to retained earnings if the balance in additional paid-in capital was not sufficient. Employee Benefit Plans The Company has several defined benefit plans. Various actuarial methods and assumptions are used in determining net pension and post-retirement costs and obligations. Key assumptions include the discount rate used to determine the present value of future benefits and the expected long-term rate of return on plan assets. The over-funded or under-funded status of the defined benefit plans is recorded as an asset or liability on the consolidated balance sheet. The gains or losses that arise during the period are recognized as a component of comprehensive income, net of tax. These costs are then subsequently recognized as components of net periodic benefit cost in the consolidated statements of operations. Under the provisions of ASU No. 2015-04, Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets, the Company is permitted to use December 31 of each year, as opposed to the Company's last day of each fiscal year, as an alternate measurement date for its defined benefit plans. Facility Closure and Severance Costs The Company records severance costs when the appropriate notifications have been made to affected employees or when the decision is made, if the benefits are contractual. When employees are required to work for a period before termination, the severance costs are recognized over the required service period. Relocation and recruitment costs are expensed as incurred. For operating leases, lease termination costs are recognized at fair value at the date the Company ceases to use the leased property, and adjusted for the effects of deferred items recognized under the lease and reduced by estimated sub-lease rental income. Useful lives assigned to fixed assets at the facility to be closed are revised based on the specifics of the exit plan, resulting in accelerated depreciation expense. Leases and Deferred Rent The Company enters into a significant number of lease transactions related to properties for its retail stores in addition to leases for offices, distribution facilities, and other uses. The lease agreements may contain provisions related to allowances for property improvements, rent escalation, and free rent periods. Substantially all of these leases are classified as operating leases for accounting purposes. For property improvement allowances, the Company records a deferred lease credit on the consolidated balance sheet and amortizes the deferred lease credit as a reduction of rent expense over the terms of the applicable lease. For scheduled rent escalation clauses during the lease term, the Company records rent expense on a straight-line basis over the term of the lease. The difference between the rent expense and the amount payable under the lease is included within the Company's liabilities on the consolidated balance sheet. The term of the lease over which the Company amortizes allowances and minimum rental expenses on a straight-line basis begins on the date of initial possession, which is generally when the Company enters the space and/or begins construction. Where leases provide for contingent rents, which are generally determined as a percentage of gross sales, the Company records additional rent expense when management determines that achieving the specified level of revenue during the fiscal year is probable. Amounts accrued for contingent rent are included within the Company's liabilities on the consolidated balance sheet. Seasonality The Company experiences seasonal fluctuations in its sales and profitability due to the timing of certain holidays and key retail shopping periods, typically resulting in lower sales and gross profit in the first half of its fiscal year. Accordingly, the Company's results of operations during the first half of the year may not be indicative of the results for the full year. Recent Accounting Pronouncements Adopted in Fiscal 2018 Revenue from Contracts with Customers (ASC No. 606) At the beginning of fiscal 2018, the Company adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and all related amendments (“ASC 606”) using the full retrospective adoption method. Refer to Note 3, Revenue Recognition, for additional information. Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), was effective for the Company at the beginning of its fiscal 2018. ASC 606 clarifies the principles for recognizing revenue and is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Further, the guidance requires improved and additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Beginning in the first quarter of fiscal 2018, the Company applied the provisions of ASC 606 retrospectively to each prior reporting period presented for fiscal 2017 and fiscal 2016. For all periods prior to fiscal 2016, the adoption of ASC 606 is reported as an adjustment to opening retained earnings at the beginning of fiscal 2016 of approximately $0.6 million. The adoption of ASC 606, including any of the policy elections required or permitted by ASC 606, had no material effect on the Company's consolidated financial position, results of operations, cash flows, processes, systems, or controls. Classification of Costs Related to Defined Benefit Pension and Other Post-retirement Benefit Plans (ASU 2017-07) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 changes how employers that sponsor defined benefit pension and/or other post-retirement benefit plans present the net periodic benefit costs in the statement of operations. Under this new guidance, an employer's statement of operations presents service cost arising in the current period in the same statement line item as other employee compensation. However, all other components of current period costs related to defined benefit plans, such as prior service costs and actuarial gains and losses, are presented on the statement of operations on a line item outside (or below) operating income. ASU 2017-07 affects only the classification of certain costs on the statement of operations, not the determination of costs. Net periodic pension costs related to the Company's frozen defined benefit pension plan and post-retirement medical benefit plan were not material for fiscal 2018, or prior periods. Prior period results have not been reclassified on the Company's statement of operations due to materiality. Modifications to Share-based Compensation Awards (ASU 2017-09) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-09, Compensation-Stock Compensation Topic 718-Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be accounted for as modifications. Entities apply the modification accounting guidance if the value, vesting conditions, or classification of an award changes. The Company has not modified any share-based payment awards. If the Company modifies share-based payment awards in the future, it will apply the provisions of ASU 2017-09. Definition of a Business (ASU 2017-01) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 assists entities in determining if acquired assets constitute the acquisition of a business or the acquisition of assets for accounting and reporting purposes. This distinction is important because goodwill can only be recognized in an acquisition of a business. Prior to ASU 2017-01, if revenues were generated immediately before and after a transaction, the acquisition was typically considered a business. Under ASU 2017-01, entities are required to further assess the substance of the processes they acquire. If the Company commences or completes an acquisition in future periods, it will apply the provisions of ASU 2017-01. Statement of Cash Flows (ASU 2016-15) At the beginning of fiscal 2018, the Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230) ("ASU 2016-15"). ASU 2016-15 represents a consensus of the FASB’s Emerging Issues Task Force on eight separate issues that, if present, can impact classifications on the statement of cash flows. The guidance requires application using a retrospective transition method. The adoption of ASU 2016-15 only impacted the classification of certain insurance proceeds on the Company's consolidated statement of cash flows for fiscal 2018. To Be Adopted After Fiscal 2018 Leases (ASU 2016-02) In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842, which has been codified in ASC 842, Leases ("ASC 842"). Under this new guidance, as a lessee, certain of the Company’s leases under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a right-of-use ("ROU") asset and a lease liability. The Company expects to utilize the related package of practical expedients permitted by the transition guidance in ASU 2016-02, which allows the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its initial direct costs for existing leases. The Company expects to recognize lease liabilities for its operating leases totaling between $800 million and $900 million upon adoption. The initial ROU assets recognized will be equal to the initial operating lease liabilities, adjusted for the balance on adoption date of prepaid and accrued rent, lease incentives and unamortized initial direct costs. The Company currently expects to recognize ROU assets totaling between $650 million and $750 million upon adoption. The Company does not expect adoption of the standard to have a material impact on the Company’s historical capital leases, which will be presented as finance leases under ASU 2016-02. Additionally, the Company does not believe adoption of this standard will have a material effect on the Company's consolidated results of operations or cash flows. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02) In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"). ASU 2018-02 permits a company to reclassify the income tax effects of the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") on items within accumulated other comprehensive income or loss ("AOCI-L") to retained earnings. Because most items that are charged to AOCI-L are recorded net of applicable income taxes, the subsequent reclassification of these items from AOCI-L to the statement of operations will be at different income tax rates due to the 2017 Tax Act, thereby leaving a "stranded" tax balance within AOCI-L. ASU 2018-02 will allow a company to transfer these "stranded" amounts from AOCI-L to retained earnings. ASU 2018-02 will be effective for the Company at the beginning of fiscal 2019, with early adoption permitted. The Company has amounts in its AOCI-L for defined benefit retirement plans that were recorded net of applicable income taxes, thus the Company anticipates the transfer of "stranded" tax amounts from its AOCI-L to retained earnings upon the adoption of ASU 2018-02. The believes the effect of the adoption of ASU 2018-02 will not be material to the Company's financial position. Further, the Company does not believe the adoption will have an effect on the Company's consolidated results of operations or cash flows. Credit Losses (ASU 2016-13) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, an entity will recognize a loss (or allowance) upon initial recognition of the asset that reflects all future events that will lead to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. ASU 2016-13 is effective for public companies for fiscal years beginning after December 15, 2019 with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods therein. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable. Goodwill Impairment Testing (ASU 2017-04) In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, ASU 2017-04 will be applied prospectively. Adoption for public companies is effective for annual and interim impairment tests performed in periods after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption. |
REVENUE RECOGNITION |
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REVENUE RECOGNITION | REVENUE RECOGNITION The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements, as well as arrangements that are implied by customary practices or law. At the beginning of fiscal 2018, the Company adopted the provisions of ASC 606 using the full retrospective adoption method. Under the full retrospective method, the Company adjusted all periods in fiscal 2017 and fiscal 2016 to reflect the provisions of ASC 606, and retained earnings at January 2, 2016 (beginning of fiscal 2016) were adjusted for the cumulative effect for prior periods. Refer to the section "Revenue from Contracts with Customers (ASC No. 606)" in Note 2, Significant Accounting Policies, for changes to the Company's accounting policies due to the adoption of ASC 606. ASC 606 affected the Company's retail channels as follows:
The effects of retrospective adoption on the Company's consolidated Statements of Operations were as follows:
The cumulative effect to the Company’s retained earnings at January 2, 2016 was an after-tax increase of approximately $0.6 million. The effects of adoption of ASC 606 on the Company’s consolidated balance sheet at December 30, 2017 were as follows:
Disaggregation of Revenue The Company sells its products directly to consumers ("direct-to-consumer") and to other retail companies and partners that subsequently sell the products directly to their own retail customers. The Company also earns royalties from its licensees. Disaggregated revenues from these sources for fiscal years 2018, 2017, and 2016 were as follows:
Accounts Receivable from Customers and Licensees The components of Accounts receivable, net, were as follows:
Contract Assets and Liabilities The Company's contract assets are not material. Contract Liabilities The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:
Composition of Contract Liabilities Unredeemed gift cards - the Company is obligated to transfer goods in the future to customers who have purchased gift cards. Periodic changes in the gift card contract liability result from the redemption of gift cards by customers and the recognition of estimated breakage revenue for those gift card balances that are not expected to be redeemed. The majority of our gift cards do not have an expiration date; however, all outstanding gift card balances are classified by the Company as current liabilities since gift cards are redeemable on demand by the valid holder. The majority of the Company's gift cards are redeemed within one year of issuance. Unredeemed loyalty rewards - points and reward certificates earned by customers under the Company’s loyalty programs represent obligations of the Company to transfer goods to the customer upon redemption. Periodic changes in the loyalty program contract liability result from reward certificate redemptions and expirations. The earning and redemption cycles for our loyalty program are under one year in duration. |
BUSINESS ACQUISITIONS (Notes) |
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Business Combinations [Abstract] | |
BUSINESS ACQUISITIONS | ACQUISITIONS Based on their purchase prices and pre-acquisition operating results and assets, neither of the businesses acquired by the Company in fiscal 2017 met the materiality requirements for preparation and presentation of pro forma financial information, either individually or in the aggregate. Skip Hop Acquisition Carter's, Inc.'s wholly-owned subsidiary, The William Carter Company ("TWCC"), acquired 100% of the voting equity interests of Skip Hop Holdings, Inc. and subsidiaries (collectively "Skip Hop") after the close of business on February 22, 2017. The Skip Hop purchase was deemed to be the acquisition of a business under the provisions of ASC No. 805, Business Combinations ("ASC 805"). The Company's consolidated financial statements reflect the consolidation of the financial position, results of operations and cash flows of Skip Hop beginning February 23, 2017. The measurement period (as defined in ASC 805) for Skip Hop was complete at the end of fiscal 2017 and all measurement period adjustments were reflected in the Company's consolidated balance sheet as of December 30, 2017. As a result of the measurement period adjustments recorded between the acquisition date and the end of fiscal 2017, the net assets acquired consisted of the following: $46.0 million of goodwill including an assembled workforce; $104.1 million of intangible assets comprised of a tradename and acquired customer relationships; $53.9 million of tangible assets acquired; and $20.8 million of liabilities in addition to $36.3 million of deferred income tax liabilities. The adjusted purchase price was approximately $142.5 million, net of $0.8 million of cash acquired. Acquisition of Mexican Licensee On August 1, 2017, the Company, through certain of its wholly-owned subsidiaries, acquired the outstanding equity of the Company's licensee in Mexico and a related entity (collectively "Carter's Mexico"). Both entities are incorporated under Mexican law. Prior to the acquisition, Carter's Mexico was primarily a licensee and wholesale customer of the Company. The Carter's Mexico purchase was deemed to be the acquisition of a business under the provisions of ASC 805. The Company's consolidated financial statements reflect the consolidation of the financial position, results of operations and cash flows of Carter's Mexico beginning August 1, 2017. Carter's Mexico became part of the Company's International reportable segment. As of December 30, 2017, preliminary values assigned to assets acquired included inventories of approximately $8.3 million, a customer relationships intangible asset of approximately $3.5 million, and goodwill of approximately $6.2 million. Measurement period adjustments made in the first quarter of fiscal 2018 were not material. The measurement period (as defined in ASC 805) for the acquisition of Carter's Mexico was completed during the second quarter of fiscal 2018 and all measurement period adjustments were reflected in the Company's consolidated balance sheet as of December 29, 2018. As a result of the measurement period adjustments recorded between the acquisition date and the end of the second quarter of fiscal 2018, the values assigned to assets acquired included inventories of approximately $8.0 million, a customer relationships intangible asset of approximately $3.5 million, and goodwill of approximately $6.3 million. |
PROPERTY, PLANT, AND EQUIPMENT |
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PROPERTY, PLANT, AND EQUIPMENT | PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment, net consists of the following:
Depreciation and amortization expense related to property, plant, and equipment was approximately $85.9 million, $81.8 million, and $71.5 million for fiscal years 2018, 2017, and 2016, respectively. |
GOODWILL AND OTHER INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the Company’s goodwill and other intangible assets at the end of the fiscal year:
Changes in the carrying values between comparative periods for goodwill related to the Company's 2011 acquisition of its Canadian business (Bonnie Togs) were due to fluctuations in the foreign currency exchange rates between the Canadian and U.S. dollar that were used in the remeasurement process for preparing the Company's consolidated financial statements. The changes in the carrying values of goodwill, customer relationships, and tradename intangible assets for Skip Hop and Carter's Mexico, including the related accumulated amortization, that were not attributable to amortization expense was also impacted by foreign currency exchange rate fluctuations. Amortization expense for intangible assets subject to amortization was approximately $3.7 million, $2.6 million, and $1.9 million for fiscal years 2018, 2017, and 2016, respectively. The estimated amortization expense for the next five fiscal years is as follows:
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ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME | ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME Accumulated other comprehensive (loss) income is summarized as follows:
As of December 29, 2018 and December 30, 2017, the cumulative tax effect on the pension liability adjustments were $5.4 million and $5.3 million, respectively. As of December 29, 2018 and December 30, 2017, the cumulative tax effect on the post-retirement liability adjustments were approximately $1.0 million for both years. The deferred income taxes associated with these obligations are subject to adjustments upon the Company's adoption of ASC 2018-02. See Note 2, Significant Accounting Policies. For the fiscal years ended December 29, 2018 and December 30, 2017, amounts reclassified from accumulated other comprehensive loss to the consolidated statements of operations consisted of amortization of actuarial gains and losses related to the Company's defined benefit retirement plans. Such amortization amounts are included in the net periodic cost or benefit recognized for these plans during the respective fiscal year. For additional information, see Note 11, Employee Benefit Plans, to the consolidated financial statements. |
LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT Long-term debt consisted of the following:
Senior Notes During fiscal 2013, the Company's 100% owned subsidiary, TWCC issued $400 million principal amount of senior notes (the "senior notes") at par, bearing interest at a rate of 5.25% per annum, and maturing on August 15, 2021, all of which were outstanding as of December 29, 2018. At issuance, TWCC received net proceeds from the offering of the senior notes of approximately $394.2 million, after deducting bank fees and other related fees. Approximately $7.0 million, including both bank fees and other third party expenses, was capitalized in connection with the issuance and is being amortized over the term of the senior notes. The senior notes are unsecured and are fully and unconditionally guaranteed by Carter's, Inc. and certain domestic subsidiaries of TWCC. The guarantor subsidiaries are 100% owned directly or indirectly by Carter's, Inc. and all guarantees are joint, several and unconditional. On and after August 15, 2017, TWCC may redeem all or part of the senior notes at the redemption prices (expressed as percentages of principal amount of the senior notes to be redeemed) set forth below, plus accrued and unpaid interest. The redemption price is applicable when the redemption occurs during the twelve-month period beginning on August 15 of each of the years indicated is as follows:
Upon the occurrence of specific kinds of changes of control, unless a redemption notice with respect to all the outstanding senior notes has previously or concurrently been mailed or delivered, TWCC will be required to make an offer to purchase the senior notes at 101% of their principal amount. In addition, if TWCC or any of its restricted subsidiaries engages in certain asset sales, under certain circumstances TWCC will be required to use the net proceeds to make an offer to purchase the senior notes at 100% of their principal amount. The indenture governing the senior notes includes a number of covenants, that, among other things and subject to certain exceptions, restrict TWCC's ability and the ability of certain of its subsidiaries to: (a) incur, assume or guarantee additional indebtedness; (b) issue disqualified stock and preferred stock; (c) pay dividends or make distributions or other restricted payments; (d) prepay, redeem or repurchase certain debt; (e) make loans and investments (including joint ventures); (f) incur liens; (g) create restrictions on the payment of dividends or other amounts from restricted subsidiaries that are not guarantors of the notes; (h) sell or otherwise dispose of assets, including capital stock of subsidiaries; (i) consolidate or merge with or into, or sell substantially all of TWCC's assets to, another person; (j) designate subsidiaries as unrestricted subsidiaries; and (k) enter into transactions with affiliates. Specific provisions restrict the ability of the Company's operating subsidiary, TWCC, from paying cash dividends to Carter’s, Inc. in excess of $100.0 million plus an additional amount that builds based on 50% of our consolidated net income on a cumulative basis beginning with the third fiscal quarter of 2013 and subject to certain conditions, unless TWCC and its consolidated subsidiaries meet a leverage ratio requirement under the indenture, which could restrict Carter's, Inc. from paying cash dividends on our common stock. Additionally, the terms of the notes contain customary affirmative covenants and provide for events of default which, if certain of them occur, would permit the trustee or the holders of at least 25% in principal amount of the then total outstanding senior notes to declare all amounts owning under the notes to be due and payable. Carter's, Inc. is not subject to these covenants. Secured Revolving Credit Facility On August 25, 2017, TWCC and the syndicate of lenders entered into a fourth amended and restated secured revolving credit agreement. This amendment to the secured revolving credit facility provides: (a) an extension of the term of the facility to August 25, 2022 and (b) an increase in the aggregate credit line to $750 million which includes a $650 million U.S. dollar facility and a $100 million multicurrency facility denominated in U.S. dollars, Canadian dollars, Euros, Pounds Sterling, or other currencies agreed to by the applicable lenders. The $650 million U.S. dollar facility is inclusive of a $100 million sub-limit for letters of credit and a swing line sub-limit of $70 million. The $100 million multicurrency facility is inclusive of a $40 million sub-limit for letters of credit and a swing line sub-limit of $15 million. In addition, the secured revolving credit facility provides for incremental borrowing facilities up to $425 million, which are comprised of an incremental $350 million U.S. dollar revolving credit facility and an incremental $75 million multicurrency revolving credit facility. The incremental U.S. dollar revolving credit facility can increase to an unlimited borrowing amount so long as the consolidated first lien leverage ratio (as defined in the secured revolving credit facility) does not exceed 2.25:1.00. In connection with the amendment, the Company paid approximately $2.1 million in debt issuance costs. These debt issuance costs, together with existing unamortized debt issuance costs, are being amortized over the five-year remaining term of the secured revolving credit facility. On September 21, 2018, TWCC and a syndicate of lenders entered into Amendment No. 1 to its fourth amended and restated credit agreement that, among other things, extended the term of the facility from August 25, 2022 to September 21, 2023. In connection with the amendment, the Company paid approximately $1.0 million in debt issuance costs. These newly-incurred debt issuance costs, together with existing unamortized debt issuance costs, are being amortized over the five-year remaining term of the secured revolving credit facility. Under the secured revolving credit facility, TWCC and its domestic subsidiaries have granted to the collateral agent, for the benefit of the lenders, valid and perfected first priority security interests in substantially all of their present and future assets, excluding certain customary exceptions, and guarantee the obligations of the borrowers. In addition, The Genuine Canadian Corp., as Canadian borrower, and Carter’s Holdings B.V., as Dutch borrower, have each guaranteed the obligations of the other. As of December 29, 2018 and December 30, 2017, the Company had $196.0 million and $221.0 million in outstanding borrowings under its secured revolving credit facility, respectively, exclusive of $5.0 million and $4.5 million of outstanding letters of credit, respectively. As of December 29, 2018 and December 30, 2017, there were approximately $549.0 million and $524.5 million available for future borrowing, respectively. As of December 29, 2018, the interest rate margins applicable to the amended revolving credit facility were 1.625% for LIBOR (London Interbank Offered Rate) rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 1.125% to 1.875%) and 0.625% for base rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 0.125% to 0.875%). As of December 29, 2018 and December 30, 2017, U.S. dollar borrowings outstanding under the secured revolving credit facility accrued interest at a LIBOR rate plus the applicable base rate, which resulted in a weighted-average borrowing rate of 4.11% and 2.93%, respectively. There were no Canadian borrowings outstanding on December 29, 2018 or December 30, 2017. Covenants Subject to certain customary exceptions, the amended revolving credit facility contains covenants that restrict the Company's ability to, among other things: (i) create or incur liens, debt, guarantees or other investments, (ii) engage in mergers and consolidations, (iii) pay dividends or other distributions to, and redemptions and repurchases from, equity holders, (iv) prepay, redeem or repurchase subordinated or junior debt, (v) amend organizational documents, and (vi) engage in certain transactions with affiliates. The amended revolving credit facility also contains financial covenants. Specifically, TWCC and its subsidiaries will not (i) permit at the end of any four consecutive fiscal quarters the Lease Adjusted Leverage Ratio (defined as, with certain adjustments, the ratio of the Company's consolidated indebtedness plus six times rent expense, as defined, to consolidated net income before interest, taxes, depreciation, amortization, and rent expense ("EBITDAR")) to exceed 4.00:1.00 (provided, however, that if any "Material Acquisition" occurs and the Lease Adjusted Leverage Ratio on a pro forma basis giving effect to the consummation of the Material Acquisition is less than 4.00:1.00, then the maximum Lease Adjusted Leverage Ratio may be increased to 4.50:1.00 for the fiscal quarter in which such Material Acquisition is consummated and the three fiscal quarters immediately following the fiscal quarter in which such Material Acquisition occurs) or (ii) permit at the end of any four consecutive fiscal quarters the Consolidated Fixed Charge Coverage Ratio (defined as, with certain adjustments, the ratio of consolidated EBITDAR to consolidated fixed charges (defined as interest plus rent expense)), for any such period to be less than 2.25:1.00 (provided, however, that if any Material Acquisition occurs and the Consolidated Fixed Charge Coverage Ratio on a pro forma basis giving effect to the consummation of the Material Acquisition is at least 2.25:1.00, then the minimum Consolidated Fixed Charge Coverage Ratio may be decreased to 2.00:1.00 for the fiscal quarter in which such Material Acquisition is consummated and the three fiscal quarters immediately following the fiscal quarter in which such Material Acquisition occurs). The amended revolving credit facility also provides that certain covenants fall away and that the liens over the collateral securing each of the Company and certain subsidiaries' collective obligations are released following, among other things, the achievement of, and during the maintenance of, investment grade ratings by Moody's Investor Services, Inc. and Standard & Poor's Ratings Services. As of December 29, 2018, the Company was in compliance with its financial debt covenants under the secured revolving credit facility. |
COMMON STOCK |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMON STOCK | COMMON STOCK Share Repurchases In fiscal years prior to 2016, the Company's Board of Directors authorized the repurchase of shares of the Company's common stock in amounts up to $462.5 million. On both February 24, 2016 and February 22, 2018, the Company's Board of Directors authorized an additional $500 million of share repurchases, thereby authorizing repurchase amounts up to $1.46 billion. The total remaining capacity under the repurchase authorizations as of December 29, 2018 was $392.6 million. Open-market repurchases of our common stock during fiscal years 2018, 2017 and 2016 were as follows:
In addition to the open-market repurchases completed in fiscal years 2018, 2017 and 2016, the Company completed additional open-market repurchases totaling approximately $387.6 million in fiscal year priors to 2016. Future share repurchases may occur from time to time in the open market, in negotiated transactions, or otherwise. The timing and amount of any repurchases will be determined by the Company based on its evaluation of market conditions, share price, other investment priorities, and other factors. The share repurchase authorizations have no expiration dates. Dividends In fiscal 2018, the Company's Board of Directors declared and paid quarterly cash dividends of $0.45 per share during all four quarters. In fiscal 2017, the Company's Board of Directors paid quarterly cash dividends of $0.37 per share during all four quarters. On February 14, 2019, the Company's Board of Directors authorized a quarterly cash dividend payment of $0.50 per common share, payable on March 22, 2019 to shareholders of record at the close of business on March 12, 2019. Future declarations of dividends and the establishment of future record and payment dates are at the discretion of the Company's Board of Directors based on a number of factors, including the Company's future financial performance and other investment priorities. Provisions in the Company's secured revolving credit facility and indenture governing its senior notes could have the effect of restricting the Company’s ability to pay future cash dividends on or make future repurchases of its common stock, as further described in Note 8, Long-Term Debt, to the consolidated financial statements. |
STOCK-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Under the Company’s Amended and Restated Equity Incentive Plan (the "Plan"), the Compensation Committee of the Board of Directors may award incentive stock options, stock appreciation rights, restricted stock, unrestricted stock, stock deliverable on a deferred basis (including restricted stock units), and performance-based stock awards. At the Company's May 17, 2018 shareholders' meeting, the shareholders approved an amendment to the Plan to increase the maximum number of shares of stock available under the Plan by 3,000,000 shares from a cumulative total of 15,778,392 shares to 18,778,392 shares. As of December 29, 2018, there were 3,702,701 remaining shares available for grant under the Plan. The Plan makes provision for the treatment of awards upon termination of service or in the case of a merger or similar corporate transaction. Participation in the Plan is limited to members of the Company's board of directors, executive officers and other key employees. The limit on shares available under the Plan, the individual limits, and other award terms are subject to adjustment to reflect stock splits or stock dividends, combinations, and certain other events. All stock options issued under the Plan expire no later than ten years from the date of grant. The Company believes that the current level of authorized shares is sufficient to satisfy future grants for the foreseeable future. The Company recorded stock-based compensation cost as follows:
The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period. During fiscal 2018, the Company revised the estimated achievement of performance targets related to certain performance-based grants resulting in a $3.9 million reduction to stock compensation expense. Stock Options Stock options vest in equal annual installments over a four-year period. The Company issues new shares to satisfy stock option exercises. Changes in the Company's stock options for the fiscal year ended December 29, 2018 were as follows:
The intrinsic value of stock options exercised during the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 was approximately $16.6 million, $14.9 million, and $9.0 million, respectively. At December 29, 2018, there was approximately $8.8 million of unrecognized compensation cost (net of estimated forfeitures) related to stock options which is expected to be recognized over a weighted-average period of approximately 2.6 years. The table below presents the weighted-average assumptions used to calculate the fair value of options granted in each of the respective fiscal years:
Restricted Stock Awards Restricted stock awards issued under the Plan vest based upon: 1) continued service (time-based) or 2) a combination of continued service and performance targets (performance-based). The following table summarizes activity related to all restricted stock awards during the fiscal year ended December 29, 2018:
During fiscal 2017, a total of 168,471 shares of restricted stock vested with a weighted-average fair value of $74.00 per share. During fiscal 2016, a total of 218,335 shares of restricted stock vested with a weighted-average fair value of $62.98 per share. At December 29, 2018, there was approximately $16.0 million of unrecognized compensation cost (net of estimated forfeitures) related to all restricted stock awards which is expected to be recognized over a weighted-average period of approximately 2.3 years. Time-based Restricted Stock Awards Time-based restricted stock awards vest in equal annual installments or cliff vest after a three- or four-year period. During fiscal years 2018, 2017, and 2016, a total of 100,625 shares, 114,703 shares, and 124,135 shares, respectively, of time-based restricted stock vested with a weighted-average fair value of $85.64 per share, $76.58 per share, and $65.80 per share, respectively. At December 29, 2018, there was approximately $13.4 million of unrecognized compensation cost (net of estimated forfeitures) related to time-based restricted stock which is expected to be recognized over a weighted-average period of approximately 2.4 years. Performance-based Restricted Stock Awards
During the fiscal year ended December 29, 2018, a total of 50,696 performance shares vested with a weighted-average fair value of $82.40 per share. As of December 29, 2018, a total of 153,922 performance shares were unvested with a weighted-average fair value of $96.47 per share. Vesting of these 153,922 performance shares is based on the performance targets for the shares granted in fiscal 2018, 2017, and 2016. As of December 29, 2018, there was approximately $2.6 million of unrecognized compensation cost (net of estimated forfeitures) related to the unvested performance-based restricted stock awards which is expected to be recognized over a weighted-average period of approximately 1.7 years. Stock Awards Included in restricted stock awards are grants to non-management members of the Company's Board of Directors. At issuance, these awards were fully vested and issued as shares of the Company's common stock. During fiscal years 2018, 2017, and 2016, such awards were as follows:
The Company received no proceeds from the issuance of these shares. |
EMPLOYEE BENEFIT PLANS |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS The Company maintains defined contribution plans, a deferred compensation plan, and two defined benefit plans. The two defined benefit plans include the OshKosh B'Gosh pension plan and a post-retirement life and medical plan. Oshkosh B'Gosh Pension Plan Funded Status The retirement benefits under the OshKosh B'Gosh pension plan were frozen as of December 31, 2005. A reconciliation of changes in the projected pension benefit obligation and plan assets is as follows:
The accumulated benefit obligation is equal to the projected benefit obligation as of December 29, 2018 and December 30, 2017 because the plan is frozen. The unfunded status is included in other long-term liabilities in the Company's consolidated balance sheet. The Company made a discretionary contribution of $6.0 million to the OshKosh B'Gosh pension plan in fiscal 2018. The Company does not expect to make any contributions to the OshKosh B'Gosh pension plan during fiscal 2019 as the plan's funding exceeds the minimum funding requirements. The actuarial gain in fiscal 2018 was primarily attributable to a higher discount rate while the actuarial loss incurred in fiscal 2017 was primarily attributable to a lower discount rate. Net Periodic Pension Cost and Changes Recognized in Other Comprehensive Income The components of net periodic pension cost recognized in the statement of operations and changes recognized in other comprehensive income were as follows:
Assumptions The actuarial computations utilized the following assumptions, using year-end measurement dates:
The discount rates used at December 29, 2018, December 30, 2017, and December 31, 2016 were determined with consideration given to the Citigroup Pension Discount and Liability Index and the Barclay Capital Aggregate AA Bond Index, adjusted for the timing of expected plan distributions. The Company believes these indexes reflect a risk-free rate consistent with a portfolio of high quality debt instruments with maturities that are comparable to the timing of the expected payments under the plan. The expected long-term rate of return assumption considers historic returns adjusted for changes in overall economic conditions that may affect future returns and a weighting of each investment class. A 0.25% change in the assumed discount rate would result in an increase or decrease in the amount of the pension plan's projected benefit obligation of approximately $2.0 million. The Company currently expects benefit payments for its defined benefit pension plans as follows for the next ten fiscal years:
Plan Assets The Company's investment strategy is to invest in a well-diversified portfolio consisting of mutual funds or group annuity contracts that minimize concentration of risks by utilizing a variety of asset types, fund strategies, and fund managers. The target allocation for plan assets is 45% equity securities, 50% bond funds, and 5% real estate investments. The plan expects to gradually reduce its equity exposure. The Company’s investment policy anticipates a rate of return sufficient to fund pension plan benefits while minimizing the risk to the Company of additional funding. Based on actual returns over a long-term basis, the Company believes that a 5.50% annual return on plan assets can be achieved based on the current allocation and investment strategy. Equity securities primarily include funds invested in large-cap and mid-cap companies, primarily located in the U.S., with a small exposure to international equities. Fixed income securities include funds holding corporate bonds of companies from diverse industries, and U.S. Treasuries. Real estate funds include investments in actively managed mutual funds that invest in real estate. The fair value of the Company's pension plan assets at December 29, 2018 and December 30, 2017, by asset category, were as follows:
Post-retirement Life and Medical Plan Under a defined benefit plan frozen in 1991, the Company offers a comprehensive post-retirement medical plan to current and certain future retirees and their spouses. The Company also offers life insurance to current and certain future retirees. Employee contributions are required as a condition of participation for both medical benefits and life insurance and the Company's liabilities are net of these expected employee contributions. Accumulated Post-Retirement Benefit Obligation The following is a reconciliation of the accumulated post-retirement benefit obligation ("APBO") under this plan:
Approximately $2.9 million and $3.6 million of the APBO at the end of fiscal 2018 and 2017, respectively, were classified as other long term liabilities in the Company's consolidated balance sheets. Net Periodic Post-Retirement (Benefit) Cost and Changes Recognized in Other Comprehensive Income The components of net periodic post-retirement cost (benefit) recognized in the statement of operations and changes recognized in other comprehensive income were as follows:
Assumptions The actuarial computations utilized the following assumptions, using year-end measurement dates:
The discount rates used at December 29, 2018, December 30, 2017, and December 31, 2016, were determined with primary consideration given to the Citigroup Pension Discount and Liability Index adjusted for the timing of expected plan distributions. The Company believes this index reflects a risk-free rate with maturities that are comparable to the timing of the expected payments under the plan. The effects on the Company's plan of all future increases in health care costs are borne primarily by employees; accordingly, increasing medical costs are not expected to have any material effect on the Company's future financial results. The Company's contribution for these post-retirement benefit obligations was approximately $0.3 million in fiscal year 2018, $0.3 million in fiscal year 2017, and $0.4 million in fiscal year 2016. The Company expects that its contribution and benefit payments for post-retirement benefit obligations will be approximately $0.3 million for fiscal years 2019, 2020, 2021, 2022, and 2023. For the five years subsequent to fiscal 2023, the aggregate contributions and benefit payments for post-retirement benefit obligations is expected to be approximately $1.1 million. The Company does not pre-fund this plan and as a result there are no plan assets. Deferred Compensation Plan The Company maintains a deferred compensation plan allowing voluntary salary and incentive compensation deferrals for qualifying employees as permitted by the Internal Revenue Code. Participant deferrals earn investment returns based on a select number of investment options, including equity, debt, and real estate mutual funds. The Company invests comparable amounts in marketable securities to mitigate the risk associated with the investment return on the employee deferrals. Defined Contribution Plan The Company also sponsors defined contribution savings plans in the United States and Canada. The U.S. plan covers employees who are at least 21 years of age and have completed one calendar month of service and, if part-time, work a minimum of one thousand hours of service within the one-year period following the commencement of employment or during any subsequent calendar year. The plan provides for a discretionary employer match. The Company's expense for the U.S. defined contribution savings plan totaled approximately $8.0 million, $13.9 million, and $10.5 million for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. Expenses related to the Canadian defined contribution savings plan were approximately $0.1 million for the fiscal year ended December 29, 2018 and approximately $0.3 million for the fiscal year ended December 30, 2017; amounts for fiscal 2016 were not material. |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES Provision for Income Taxes The provision for income taxes consisted of the following:
The foreign portion of the tax position substantially relates to the Company's international operations in Canada, Hong Kong and Mexico in addition to foreign tax withholdings related to the Company's foreign royalty income. The Company plans to repatriate undistributed earnings from Hong Kong and a portion of its previously taxed earnings from Canada, and has provided for deferred income taxes related to these earnings. Due to the impact of the one-time toll tax enacted under the U.S. Tax Cuts and Jobs Act of 2017 ( the “2017 Act”) which taxed cumulative earnings in our foreign subsidiaries and the current US tax regime which taxes foreign earnings in the year earned, taxes associated with repatriation are not material. Deferred income taxes have not been provided for the portion of undistributed foreign earnings from Canada or Mexico that we do not plan to repatriate, or any additional outside basis difference inherent in all foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. Total undistributed earnings from the Company’s subsidiaries in Canada and Mexico amounted to approximately $82 million. Unrecognized deferred tax liability related to undistributed earnings from the Company's subsidiaries in Canada and Mexico are estimated to be less than $2 million, based on applicable withholding taxes, levels of foreign income previously taxed in the U.S. and applicable foreign tax credit limitations. The company accounts for the additional U.S. income tax on its foreign earnings under Global Intangible Low-Taxed Income ("GILTI") as a period expense in the period in which additional tax is due. Provisional estimate The provision for income taxes recognized by the Company during 2017 reflected certain provisional estimates for the accounting of the December 22, 2017 enactment of tax law changes known as the 2017 Act. During the fourth quarter of fiscal 2017, the Company recognized an income tax provisional tax expense of $10.4 million related to the Company's total post-1986 foreign earnings and profits ("E&P") that the Company previously deferred from United States income taxes. During fiscal 2018, the Company completed its calculation of the one-time transition tax for all of its foreign subsidiaries. The adjustment made to this provisional tax expense estimate was not material. The components of income before income taxes were as follows:
Effective Rate Reconciliation The difference between the Company's effective income tax rate and the federal statutory tax rate is reconciled below:
The Company and its subsidiaries file a consolidated United States federal income tax return, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. In most cases, the Company is no longer subject to US tax authority examinations for years prior to fiscal 2014. Deferred Taxes The following table reflects the Company’s calculation of the components of deferred assets and liabilities as of December 29, 2018 and December 30, 2017. Certain previously reported amounts as of December 30, 2017 were revised in the table below. The revisions were not material to the previously issued financial statements.
Amounts recognized in the consolidated balance sheets:
During the fourth quarter of fiscal 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally a 21% federal rate. The remeasurement resulted in an income tax benefit of $50.4 million. Uncertain Tax Positions The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
As of December 29, 2018, the Company had gross unrecognized tax benefits of approximately $13.9 million, of which $11.9 million, if ultimately recognized, will affect the Company's effective tax rate in the period settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions. Because of deferred tax accounting, changes in the timing of these deductions would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authorities. Included in the reserves for unrecognized tax benefits are approximately $2.9 million of reserves for which the statute of limitations is expected to expire within the next fiscal year. If these tax benefits are ultimately recognized, such recognition, net of federal income taxes, may affect the annual effective tax rate for fiscal 2019 and the effective tax rate in the quarter in which the benefits are recognized. The Company recognizes interest related to unrecognized tax benefits as a component of interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal 2018, expense recorded on uncertain tax positions was approximately $0.8 million. During fiscal 2017 and 2016, interest expense recorded on uncertain tax positions was not significant. The Company had accrued interest on uncertain tax positions of approximately $1.8 million and $1.0 million as of December 29, 2018 and December 30, 2017, respectively. |
EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:
The Company grants shares of its common stock in the form of restricted stock awards to certain key employees under the Company's Amended and Restated Equity Incentive Plan (see Note 10, Stock-based Compensation, to the consolidated financial statements). Prior to vesting of the restricted stock awards, the grant recipients are entitled to receive non-forfeitable cash dividends if the Company's board of directors declares and pays dividends on the Company's common stock. Accordingly, unvested shares of the Company's restricted stock awards are deemed to be participating securities for purposes of computing diluted earnings per share (EPS), and therefore the Company's diluted EPS represents the lower of the amounts calculated under the treasury stock method or the two-class method of calculating diluted EPS. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company reports segment information based upon a "management approach." The management approach refers to the internal reporting that is used by management for making operating decisions and assessing the performance of the Company's reportable segments. The Company reports its corporate expenses separately as they are not included in the internal measures of segment operating performance used by the Company to measure the underlying performance of its reportable segments. Segment results include the direct costs of each segment and all other costs are allocated based upon detailed estimates and analysis of actual time and expenses incurred to support the operations of each segment or units produced or sourced to support each segment's revenue. Certain costs, including incentive compensation for certain employees, and various other general corporate costs that are not specifically allocable to segments, are included in corporate expenses below. Intersegment sales and transfers are recorded at cost and are treated as a transfer of inventory. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements. At the beginning of fiscal 2017, the Company combined its Carter's Retail and OshKosh Retail operating segments into a single U.S. Retail operating segment, and its Carter's Wholesale and OshKosh Wholesale operating segments into a single U.S. Wholesale operating segment, in order to reflect the sales-channel approach the Company's executive management now uses to evaluate its business performance and manage operations in the United States. The Company's International operating segment was not affected by these changes. The Company's operating and reportable segments are now U.S. Retail, U.S. Wholesale, and International. Prior periods have been conformed to reflect the Company's current segment structure by adding together Carter's Retail and OshKosh Retail as U.S. Retail and Carter's Wholesale and OshKosh Wholesale as U.S. Wholesale. Prior results for the International segment and Corporate expenses were not impacted. The table below presents certain segment information for the periods indicated
(7)Includes the following charges for fiscal 2017 and fiscal 2016:
Additional Data by Segment Inventory The table below represents inventory by segment:
The table below represents consolidated net sales by product:
Geographical Data Revenue The Company's international sales principally represent sales to customers in Canada. Such sales were 64.2% and 64.9% of total international sales in fiscal 2018 and 2017, respectively. Long-Lived Assets The following represents property, plant, and equipment, net, by geographic area:
Long-lived assets in the international segment relate principally to Canada. Long-lived assets in Canada were 87.4% and 87.6% of total international long-lived assets at the end of fiscal 2018 and 2017, respectively. |
FAIR VALUE MEASUREMENTS |
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Dec. 29, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Investments The Company invests in marketable securities, principally equity based mutual funds, to mitigate the risk associated with the investment return on employee deferrals of compensation. All of the marketable securities are included in Other assets on the accompanying consolidated balance sheets, and their aggregate fair values were approximately $15.7 million and $16.7 million at the end of fiscal 2018 and fiscal 2017, respectively. These investments are classified as Level 1 within the fair value hierarchy. Investments in marketable securities incurred a net loss of approximately $1.0 million and $0.1 million for fiscal 2018 and 2017, respectively. The fair value of the Company's pension plan assets at December 29, 2018 and December 30, 2017, by asset category, are disclosed in Note 11, Employee Benefits Plans, to the consolidated financial statements. Foreign Exchange Forward Contracts Fair values of any unsettled foreign exchange forward contracts are calculated by using readily observable market inputs (market-quoted currency exchange rates in effect between the U.S. dollar and the currencies of Canada and Mexico) and are classified as Level 2 within the fair value hierarchy. Any unsettled foreign exchange forward contracts are included in other current assets or other current liabilities on the Company's consolidated balance sheet at the end of each fiscal reporting period. As of December 29, 2018, there were no open foreign currency contracts. As of December 30, 2017, the fair value of open foreign currency contracts was not material. Realized and unrealized gains and losses on foreign currency contracts were not material for fiscal 2018 and 2017. For foreign currency contracts settled during fiscal 2016, the Company realized net losses of $3.2 million. These amounts are included in other (income) expense, net on the Company's consolidated statement of operations. The were no open foreign currency contracts at the end of fiscal 2016. Borrowings As of December 29, 2018, the fair value of the Company's $196.0 million in borrowings under its secured revolving credit facility approximated carrying value. The fair value of the Company's senior notes at December 29, 2018 was approximately $399 million. The fair value of these senior notes with a notional value and carrying value (gross of debt issuance costs) of $400 million was estimated using a quoted price as provided in the secondary market, which considers the Company's credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy. |
OTHER CURRENT AND LONG-TERM LIABILITIES |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CURRENT AND LONG-TERM LIABILITIES | OTHER CURRENT AND LONG-TERM LIABILITIES Other current liabilities that exceeded five percent of total current liabilities (at the end of either fiscal year) consisted of the following:
Other long-term liabilities that exceeded five percent of total liabilities (at the end of either fiscal year) consisted of the following:
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LEASE COMMITMENTS |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
LEASE COMMITMENTS | LEASE COMMITMENTS Rent expense under operating leases (including properties and computer and office equipment) was approximately $165.6 million, $161.9 million, and $150.6 million for the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. Minimum annual rental commitments under current non-cancellable operating leases, as of December 29, 2018, substantially all of which relate to leased real estate, were as follows:
Amounts related to property include leases on retail stores as well as various corporate offices, distribution facilities, and other premises. Our average term remaining for a retail store lease in the United States is approximately 4.9 years, excluding renewal options. Total commitments under capital leases were approximately $1.3 million at December 29, 2018. |
COMMITMENTS AND CONTINGENCIES |
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Dec. 29, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its financial position, results of operations, or cash flows. The Company's contractual obligations and commitments also include obligations associated with leases, the secured revolving credit agreement, senior notes, employee benefit plans, and facility consolidations/closures as disclosed elsewhere in the notes to the consolidated financial statements. |
VALUATION AND QUALIFYING ACCOUNTS |
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VALUATION AND QUALIFYING ACCOUNTS | VALUATION AND QUALIFYING ACCOUNTS Information regarding accounts receivable is as follows:
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UNAUDITED QUARTERLY FINANCIAL DATA |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNAUDITED QUARTERLY FINANCIAL DATA | UNAUDITED QUARTERLY FINANCIAL DATA The Company experiences seasonal fluctuations in its sales and profitability due to the timing of certain holidays and key retail shopping periods, typically resulting in lower sales and gross profit in the first half of its fiscal year. The unaudited summarized financial data by quarter for the fiscal years ended December 29, 2018 and December 30, 2017 is presented in the table below:
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GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS |
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS | GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The Company’s senior notes constitute debt obligations of its wholly-owned subsidiary, The William Carter Company ("TWCC" or the "Subsidiary Issuer"), are unsecured and are fully and unconditionally guaranteed by Carter’s, Inc. (the "Parent"), by each of the Parent's current domestic subsidiaries (other than TWCC), and, subject to certain exceptions, future restricted subsidiaries that guarantee the Company’s amended revolving credit facility or certain other debt of the Company or the subsidiary guarantors. The condensed consolidating financial information for the Parent, the Subsidiary Issuer, and the guarantor and non-guarantor subsidiaries has been prepared from the books and records maintained by the Company. The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10. The financial information may not necessarily be indicative of the financial position, results of operations, comprehensive income (loss), and cash flows, had the Parent, Subsidiary Issuer, guarantor or non-guarantor subsidiaries operated as independent entities. Intercompany revenues and expenses included in the subsidiary records are eliminated in consolidation. As a result of this activity, an amount due to/due from affiliates will exist at any time. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. CARTER’S, INC. Condensed Consolidating Balance Sheet As of December 29, 2018 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Balance Sheet As of December 30, 2017 (dollars in thousands)
For the fiscal year ended December 30, 2017 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Statement of Operations For the fiscal year ended December 31, 2016 (dollars in thousands)
fiscal year ended December 30, 2017 (dollars in thousands)
For the fiscal year ended December 31, 2016 (dollars in thousands)
Condensed Consolidating Statement of Cash Flows For the fiscal year ended December 29, 2018 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Statement of Cash Flows For the fiscal year ended December 30, 2017 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Statement of Cash Flows For the fiscal year ended December 31, 2016 (dollars in thousands)
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
PRINCIPLES OF CONSOLIDATION | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Carter's, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. |
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FISCAL YEAR | Fiscal Year The Company's fiscal year ends on the Saturday in December or January nearest the last day of December, resulting in an additional week of results every five or six fiscal years. Fiscal 2018, which ended on December 29, 2018, fiscal 2017, which ended on December 30, 2017, and fiscal 2016, which ended on December 31, 2016, all contained 52 weeks. |
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USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS | Use of Estimates in the Preparation of the Consolidated Financial Statements The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As disclosed in Note 2, Significant Accounting Policies, and Note 3, Revenue Recognition, at the beginning of fiscal 2018 the Company adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers, and related amendments (“ASC 606”) using the full retrospective adoption method. The full retrospective method required the Company to apply the standard to the financial statements for the period of adoption as well as to each prior reporting period presented. |
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FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS | Foreign Currency Translation and Transactions Translation adjustments The functional currency of substantially all of the Company's foreign operations is the local currency in each foreign country. Assets and liabilities are translated into U.S. dollars using the current exchange rates in effect at the balance sheet date, while revenues and expenses are translated at the average exchange rates for the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within the accompanying consolidated balance sheet. Transaction adjustments The Company also recognizes gains and losses on transactions that are denominated in a currency other than the respective entity's functional currency. Foreign currency transaction gains and losses also include intercompany loans with foreign subsidiaries that are of a short-term nature. Foreign currency transaction gains and losses are recognized in earnings, as a separate component of other expense, net, within the consolidated statements of operations. Foreign Currency Contracts As part of the Company's overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, primarily between the U.S. dollar and the currencies of Canada and Mexico, the Company may use foreign currency forward contracts to hedge purchases that are made in U.S. dollars, primarily for inventory purchases in its Canadian and Mexican operations. As part of this hedging strategy, the Company may use foreign currency forward exchange contracts with maturities of less than 12 months to provide continuing coverage throughout the hedging period. Historically, these contracts were not designated for hedge accounting treatment, and therefore changes in the fair value of these contracts have been recorded in Other (income) expense, net in the Company's consolidated statement of operations. Such foreign currency gains and losses typically include the mark-to-market fair value adjustments at the end of each reporting period related to open contracts, as well as any realized gains and losses on contracts settled during the reporting period. The fair values of any unsettled currency contracts are included in other current assets or other current liabilities on the Company's consolidated balance sheet. On the consolidated statement of cash flows, the Company includes all activity, including cash settlement of any contracts, as a component of cash flows from operations. |
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CASH AND CASH EQUIVALENTS | Cash and Cash Equivalents The Company considers all highly liquid investments that have original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of deposit accounts and cash management funds invested in U. S. government instruments. These investments are stated at cost, which approximates fair value. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions; these amounts typically settle in less than five days. Concentration of cash deposits risk As of December 29, 2018, the Company had approximately $170.1 million of cash and cash equivalents in major financial institutions, including approximately $36.7 million in financial institutions located outside of the United States. The Company maintains cash deposits with major financial institutions that exceed the insurance coverage limits provided by the Federal Deposit Insurance Corporation in the U.S. and by similar insurers for deposits located outside the U.S. To mitigate this risk, the Company utilizes a policy of allocating cash deposits among major financial institutions that have been evaluated by the Company and third-party rating agencies as having acceptable risk profiles. |
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ACCOUNTS RECEIVABLE | Accounts Receivable Concentration of credit risk In fiscal 2018, 2017, and 2016, no one customer accounted for 10% or more of the Company's consolidated net sales. At December 29, 2018, three wholesale customers each had individual receivable balances in excess of 10% of gross accounts receivable, and the total receivable balances due from these three wholesale customers in the aggregate equaled approximately 40% of total gross trade receivables outstanding. At December 30, 2017, two wholesale customers each had individual receivable balances in excess of 10% of gross accounts receivable, and the total receivable balances due from these two wholesale customers in the aggregate equaled approximately 28% of total gross accounts receivable outstanding. Valuation Accounts for Wholesale Accounts Receivable Accounts receivable reserves The Company's accounts receivable reserves for wholesale customers include an allowance for doubtful accounts and an allowance for chargebacks. The allowance for doubtful accounts includes estimated losses resulting from the inability of its customers to make payments. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, an additional allowance could be required. Past due balances over 90 days are reviewed individually for collectibility. The Company's credit and collections department reviews all other balances regularly. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. Provisions for the allowance for doubtful accounts are reflected in Selling, general and administrative expenses on the consolidated statement of operations and provisions for chargebacks are reflected as a reduction in Net sales on the consolidated statement of operations. Sales returns reserves Except in very limited instances, the Company does not allow its wholesale customers to return goods to the Company. |
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INVENTORIES | Inventories Inventories, which consist primarily of finished goods, are stated approximately at the lower of cost (first-in, first-out basis for wholesale inventory and average cost for retail inventories) or net realizable value. Obsolete, damaged, and excess inventory is carried at net realizable value by establishing reserves after assessing historical recovery rates, current market conditions, and future marketing and sales plans. Rebates, discounts, and other cash consideration received from a vendor related to inventory purchases are reflected as reductions in the cost of the related inventory item, and are therefore reflected in cost of sales when the related inventory item is sold. |
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PROPERTY, PLANT, AND EQUIPMENT | Property, Plant, and Equipment Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. When fixed assets are sold or otherwise disposed of, the accounts are relieved of the original cost of the assets and the related accumulated depreciation or amortization and any resulting profit or loss is credited or charged to income. For financial reporting purposes, depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements from 15 to 26 years, retail store fixtures, equipment, and computers from 3 to 10 years. Leasehold improvements and fixed assets purchased under capital lease are amortized over the lesser of the asset life or related lease term. The Company capitalizes the cost of its fixtures designed and purchased for use at major wholesale accounts. The cost of these fixtures is amortized over 3 years. |
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INTERNAL-USE SOFTWARE | Internal-Use Software The Company purchases software licenses from external vendors and also develops software internally using Company employees and consultants. Software license costs, including certain costs to internally develop software, that meet the applicable criteria are capitalized while all other costs are expensed as incurred. Capitalized software is depreciated or amortized on the straight-line method over its estimated useful lives, from 3 to 10 years. If a software application does not include a purchased license for the software, such as a cloud-based software application, the arrangement is accounted for as a service contract. |
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VALUATION OF GOODWILL AND OTHER INTANGIBILE ASSETS | Goodwill and Other Intangible Assets Annual impairment reviews The carrying values of the goodwill and indefinite-lived tradename assets are subject to annual impairment reviews which are performed as of the last day of each fiscal year. Additionally, a review for potential impairment is performed whenever significant events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Significant assumptions in the impairment models include estimates of future cash flows, discount rates, and, in the case of tradenames, royalty rates. Goodwill The Company performs impairment tests of its goodwill at the reporting unit level. Qualitative and quantitative methods are used to assess for impairment, including the use of discounted cash flows ("income approach") and relevant data from guideline public companies ("market approach"). Under a qualitative assessment, the Company determines if it is "more likely than not" that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, but are not limited to: macroeconomic conditions, industry and market considerations, cost factors that may have a negative effect on earnings, overall financial performance, and other relevant entity-specific events. If the Company determines that it is "more likely than not" that the fair value of the reporting unit is less than its carrying value, then the Company performs the two-step goodwill impairment test as required. If it is determined that it is "not likely" that the fair value of the reporting unit is less than its carrying value, then no further testing is required and the Company documents the relevant qualitative factors that support the strength in the fair value. The first step of a quantitative assessment is to compare the fair value of the reporting unit to its carrying value, including goodwill. The Company uses a discounted cash flow model to determine the fair value, using assumptions consistent with those of hypothetical marketplace participants. If the fair value of a reporting unit is less than its carrying value, the second step of the impairment test must be performed. The second step compares the implied fair value of the reporting unit goodwill with the carrying value of that goodwill, in order to determine the amount of the impairment loss and charge to the consolidated statement of operations. Indefinite-lived tradenames For indefinite-lived tradenames, the Company may utilize a qualitative assessment, as described above, to determine whether the fair value of an indefinite-lived asset is less than its carrying value. If a quantitative assessment is necessary, the Company determines fair value using a discounted cash flow model that uses the relief-from-royalty method. If the carrying amount exceeds the fair value of the tradename, an impairment charge is recognized in the amount of the excess. |
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IMPAIRMENT OF OTHER LONG-LIVED ASSETS | Impairment of Other Long-Lived Assets The Company reviews other long-lived assets, including property, plant, and equipment, and licensing agreements, for impairment whenever events or changes in circumstances indicate that the carrying amount of such an asset may not be recoverable. Management will determine whether there has been a permanent impairment on such assets held for use in the business by comparing anticipated undiscounted future cash flows from the use and eventual disposition of the asset or asset group to the carrying value of the asset. The amount of any resulting impairment will be calculated by comparing the carrying value to fair value, which may be estimated using the present value of the same cash flows. Long-lived assets that meet the definition of held for sale will be valued at the lower of carrying amount or fair value, less costs to sell. |
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DEFERRED DEBT ISSUANCE COSTS | Deferred Debt Issuance Costs Debt issuance costs associated with the Company's secured revolving credit facility and senior term notes are deferred and amortized to interest expense over the term of the related debt using the effective interest method. Debt issuance costs associated with Company's senior notes are presented on the Company's consolidated balance sheet as a direct reduction in the carrying value of the associated debt liability. Fees paid to lenders by the Company to obtain its secured revolving credit facility are included within Other assets on the Company's consolidated balance sheet and classified as either current or non-current based on the expiration date of the credit facility. |
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FAIR VALUE MEASUREMENTS | Fair Value Measurements The fair value framework requires the Company to categorize certain assets and liabilities into three levels, based upon the assumptions used to price those assets or liabilities. The three levels are defined as follows:
The Company measures its pension assets, deferred compensation plan investment assets, and any unsettled foreign currency forward contracts at fair value. The Company's cash and cash equivalents, accounts receivable, and accounts payable are short-term in nature. As such, their carrying value approximates fair value. The carrying values of the Company’s outstanding borrowings are not required to be remeasured and adjusted to the then-current fair values at the end of each reporting period. Instead, the fair values of the Company's outstanding borrowings are disclosed at the end of each reporting period in Note 8, Long-Term Debt, to the consolidated financial statements. Had the Company been required to remeasure and adjust the carrying values of its outstanding borrowings to fair value at the end of each reporting period, such fair value measurements would have been disclosed as a Level 2 liability in the fair value hierarchy. |
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REVENUE RECOGNITION | Revenue Recognition At the beginning of fiscal 2018, the Company adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and all related amendments (“ASC 606”) using the full retrospective adoption method. Refer to Note 3, Revenue Recognition, for additional information. The Company uses the five-step model to recognize revenue:
Performance Obligations The Company identifies each distinct performance obligation to transfer goods (or bundle of goods). The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods to the customer. Other than inbound and outbound freight and shipping arrangements, the Company does not use third parties to satisfy its performance obligations in revenue arrangements with customers. When Performance Obligations Are Satisfied Wholesale Revenues - The Company typically transfers control upon shipment. However, in certain arrangements where the Company retains the risk of loss during shipment, satisfaction of the performance obligation occurs when the goods reach the customer. Retail Revenues - For transactions in stores, the Company satisfies its performance obligation at point of sale when the customer takes possession of the goods and tenders payment. The redemption of loyalty points under the Company's rewards program and redemptions of gift cards may be part of a transaction. For purchases made through the Company’s eCommerce channel, revenue is recognized when the goods are physically delivered to the customer. The Company satisfies its performance obligations with licensees over time as customers have the right to use the intellectual property over the contract period. Significant Payment Terms Retail customers tender a form of payment, such as cash or a credit/debit card, at point of sale. For wholesale customers and licensees, payment is due based on established terms. Returns and Refunds The Company establishes return provisions for retail customers. It is the Company's policy not to accept returns from wholesale customers. Significant Judgments Sale of Goods - The Company relies on shipping terms to determine when performance obligations are satisfied. When goods are shipped to wholesale customers “FOB Shipping Point,” control of the goods is transferred to the customer at the time of shipment if there are no remaining performance obligations. The Company recognizes the revenue once control passes to the customer. For retail transactions, no significant judgments are involved since revenue is recognized at the point of sale when tender is exchanged and the customer receives the goods. Royalty Revenues - The Company transfers the right-to-use benefit to the licensee for the contract term and therefore the Company satisfies its performance obligation over time. Revenue recognized for each reporting period is based on the greater of: 1) the royalties owed on actual net sales by the licensee and 2) a minimum royalty guarantee, if applicable. Transaction Price - The transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimation into the determination of the transaction price. The Company may offer sales incentives to wholesale and retail customers, including discounts. For retail transactions, the Company has significant experience with return patterns and relies on this experience to estimate expected returns when determining the transaction price. Standalone Selling Prices - For arrangements that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation on a relative standalone selling price basis. Costs Incurred to Obtain a Contract - Incremental costs to obtain contracts are not material to the Company. Policy Elections In addition to those previously disclosed, the Company has made the following accounting policy elections and practical expedients:
The Company records its cooperative advertising arrangements with certain of its major wholesale customers at fair value. Fair value is determined based upon, among other factors, comparable market analysis for similar advertisements. The Company has included the fair value of these arrangements of approximately $3.0 million for fiscal 2018, $3.1 million for fiscal 2017, and $3.7 million for fiscal 2016 as a component of Selling, general, and administrative expenses on the accompanying consolidated statements of operations, rather than as a reduction of net sales. Amounts determined to be in excess of the fair value of these arrangements are recorded as a reduction of Net sales. |
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COST OF GOODS SOLD | Costs of Goods Sold and Selling, General and Administrative Expenses In addition to the cost of product, cost of goods sold includes expenses related to the merchandising, design, and procurement of product. Also included are outbound shipping costs incurred in the eCommerce channel related to delivery of product to the end consumer. Generally, all other expenses, excluding interest and income taxes, are included in selling, general and administrative ("SG&A") expenses, including distribution expenses. Distribution expenses that are included in SG&A primarily consist of payments to third-party shippers and handling costs to process product through our distribution facilities and delivery to our wholesale customers and to our retail stores. Distribution expenses included in SG&A totaled $188.9 million, $173.5 million, and $153.7 million for fiscal years 2018, 2017, and 2016, respectively. Definitions of gross profit and gross margin very across the industry and as such, our metrics may not be comparable to other companies. |
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ACCOUNTING FOR SHIPPING AND HANDLING FEES AND COSTS | |||||||||||||||||||||||||||||||||||||||||
ROYALTIES AND LICENSE FEES | Income From Royalties and License Fees The Company licenses the Carter's, Child of Mine, Just One You, Precious Firsts, Precious Baby, Carter's little baby basics, and Simple Joys trademarks to other companies for use on baby and young children's products, including bedding, outerwear, sleepwear, shoes, underwear, socks, room décor, toys, stationery, hair accessories, furniture, and related products. These royalties are recorded as earned, based upon the sales of licensed products by licensees and reported as royalty income in the statements of operations. |
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ADVERTISING EXPENSES | Advertising Expenses Costs associated with the production of advertising, such as writing, copy, printing, and other costs, are expensed as incurred. Costs associated with communicating advertising that has been produced, such as magazine costs and eCommerce site banners, are expensed when the advertising event takes place. |
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STOCK-BASED COMPENSATION ARRANGEMENTS | Stock-Based Compensation Arrangements The Company recognizes the cost resulting from all stock-based payment transactions in the financial statements at grant date fair value. Stock-based compensation expense is recognized over the requisite service period, net of estimated forfeitures. During the requisite service period, the Company also recognizes a deferred income tax benefit for the expense recognized for U.S. GAAP. At time of subsequent vesting, exercise, forfeiture, or expiration of an award, the difference between the Company's actual income tax deduction, if any, and the previously accrued income tax benefit is recognized in income tax expense/benefit during the current period. Stock Options The Company determines the fair value of stock options using the Black-Scholes option pricing model, which requires the use of the following subjective assumptions:
Changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation expense and the related amount recognized in the consolidated statements of operations. Time-Based Restricted Stock Awards The fair value of time-based restricted stock awards is determined based on the quoted closing price of the Company's common stock on the date of grant and is recognized as compensation expense over the vesting term of the awards, net of estimated forfeitures. Performance-Based Restricted Stock Awards The Company accounts for its performance-based restricted stock awards based on the quoted closing price of the Company's common stock on the date of grant and records stock-based compensation expense over the vesting term of the awards based on the probability that the performance criteria will be achieved, net of estimated forfeitures. The Company reassesses the probability of vesting at each reporting period and adjusts stock-based compensation expense based on its probability assessment. Stock Awards The fair value of stock granted to non-management board members is determined based on the quoted closing price of the Company's common stock on the date of grant. The Company records the stock-based compensation expense immediately as there are no vesting terms. |
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INCOME TAXES | Income Taxes The accompanying consolidated financial statements reflect current and deferred tax provisions, in accordance with ASC 740, Income Taxes. The deferred tax provision is determined under the liability method. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using presently enacted tax rates. Valuation allowances are established when it is "more likely than not" that a deferred tax asset will not be recovered. The provision for income taxes is the sum of the amount of income taxes paid or payable for the year as determined by applying the provisions of enacted tax laws to the taxable income for that year, the net change during the year in deferred tax assets and liabilities, and the net change during the year in any valuation allowances. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. A company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. If it is more likely than not that a tax position would not be sustained, then no tax benefit would be recognized. Where applicable, associated interest and penalties are also recorded. Interest is recorded as a component of interest expense and penalties, if any, are recorded within the provision for incomes taxes in the consolidated statements of operations and are classified on the consolidated balance sheets with the related liability for uncertain tax contingency liabilities. For current and deferred tax provisions, ASC 740 requires an entity to account for the effects of new income tax legislation in the same reporting period that the tax legislation is enacted. Recent tax law changes known as the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 Act") were enacted in the United States on December 22, 2017. The 2017 Act, among other things, reduces the United States federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax ("toll tax") on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. For the 2017 Act, SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, permitted the Company to calculate and recognize provisional estimates during the period of enactment (fourth quarter of fiscal 2017) for the accounting of the 2017 Act. Subsequent adjustments to provisional estimates were reflected in the Company's income tax provisions/benefits during fiscal 2018. See Note 12, Income Taxes, to the consolidated financial statements. |
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EARNINGS PER SHARE | Earnings Per Share The Company calculates basic and diluted net income per common share under the two-class method for unvested share-based payment awards that contain participating rights to dividends or dividend equivalents (whether paid or unpaid). Basic net income per share is calculated by dividing net income for the period by the weighted-average common shares outstanding for the period. Diluted net income per share includes the effect of dilutive instruments and uses the average share price for the period in determining the number of shares that are to be added to the weighted-average number of shares outstanding. |
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OPEN MARKET REPURCHASES OF COMMON STOCK | Open Market Repurchases of Common Stock Shares of the Company's common stock that are repurchased by the Company through open market transactions are retired. Through the end of fiscal 2018, all such open market repurchases have been at prices that exceeded the par value of the repurchased common stock, and the amounts of the purchase prices that exceeded par value were charged to additional paid-in capital or to retained earnings if the balance in additional paid-in capital was not sufficient. |
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EMPLOYEE BENEFIT PLANS | Employee Benefit Plans The Company has several defined benefit plans. Various actuarial methods and assumptions are used in determining net pension and post-retirement costs and obligations. Key assumptions include the discount rate used to determine the present value of future benefits and the expected long-term rate of return on plan assets. The over-funded or under-funded status of the defined benefit plans is recorded as an asset or liability on the consolidated balance sheet. The gains or losses that arise during the period are recognized as a component of comprehensive income, net of tax. These costs are then subsequently recognized as components of net periodic benefit cost in the consolidated statements of operations. Under the provisions of ASU No. 2015-04, Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets, the Company is permitted to use December 31 of each year, as opposed to the Company's last day of each fiscal year, as an alternate measurement date for its defined benefit plans. |
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FACILITY CLOSURE AND OFFICE CONSOLIDATION | Facility Closure and Severance Costs The Company records severance costs when the appropriate notifications have been made to affected employees or when the decision is made, if the benefits are contractual. When employees are required to work for a period before termination, the severance costs are recognized over the required service period. Relocation and recruitment costs are expensed as incurred. For operating leases, lease termination costs are recognized at fair value at the date the Company ceases to use the leased property, and adjusted for the effects of deferred items recognized under the lease and reduced by estimated sub-lease rental income. Useful lives assigned to fixed assets at the facility to be closed are revised based on the specifics of the exit plan, resulting in accelerated depreciation expense. |
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LEASES AND DEFERRED RENT | Leases and Deferred Rent The Company enters into a significant number of lease transactions related to properties for its retail stores in addition to leases for offices, distribution facilities, and other uses. The lease agreements may contain provisions related to allowances for property improvements, rent escalation, and free rent periods. Substantially all of these leases are classified as operating leases for accounting purposes. For property improvement allowances, the Company records a deferred lease credit on the consolidated balance sheet and amortizes the deferred lease credit as a reduction of rent expense over the terms of the applicable lease. For scheduled rent escalation clauses during the lease term, the Company records rent expense on a straight-line basis over the term of the lease. The difference between the rent expense and the amount payable under the lease is included within the Company's liabilities on the consolidated balance sheet. The term of the lease over which the Company amortizes allowances and minimum rental expenses on a straight-line basis begins on the date of initial possession, which is generally when the Company enters the space and/or begins construction. Where leases provide for contingent rents, which are generally determined as a percentage of gross sales, the Company records additional rent expense when management determines that achieving the specified level of revenue during the fiscal year is probable. Amounts accrued for contingent rent are included within the Company's liabilities on the consolidated balance sheet. |
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SEASONALITY | The Company experiences seasonal fluctuations in its sales and profitability due to the timing of certain holidays and key retail shopping periods, typically resulting in lower sales and gross profit in the first half of its fiscal year. Accordingly, the Company's results of operations during the first half of the year may not be indicative of the results for the full year. |
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RECENT ACCOUNTING PRONOUNCEMENTS | Adopted in Fiscal 2018 Revenue from Contracts with Customers (ASC No. 606) At the beginning of fiscal 2018, the Company adopted the provisions of ASC No. 606, Revenue from Contracts with Customers, and all related amendments (“ASC 606”) using the full retrospective adoption method. Refer to Note 3, Revenue Recognition, for additional information. Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), was effective for the Company at the beginning of its fiscal 2018. ASC 606 clarifies the principles for recognizing revenue and is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Further, the guidance requires improved and additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Beginning in the first quarter of fiscal 2018, the Company applied the provisions of ASC 606 retrospectively to each prior reporting period presented for fiscal 2017 and fiscal 2016. For all periods prior to fiscal 2016, the adoption of ASC 606 is reported as an adjustment to opening retained earnings at the beginning of fiscal 2016 of approximately $0.6 million. The adoption of ASC 606, including any of the policy elections required or permitted by ASC 606, had no material effect on the Company's consolidated financial position, results of operations, cash flows, processes, systems, or controls. Classification of Costs Related to Defined Benefit Pension and Other Post-retirement Benefit Plans (ASU 2017-07) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 changes how employers that sponsor defined benefit pension and/or other post-retirement benefit plans present the net periodic benefit costs in the statement of operations. Under this new guidance, an employer's statement of operations presents service cost arising in the current period in the same statement line item as other employee compensation. However, all other components of current period costs related to defined benefit plans, such as prior service costs and actuarial gains and losses, are presented on the statement of operations on a line item outside (or below) operating income. ASU 2017-07 affects only the classification of certain costs on the statement of operations, not the determination of costs. Net periodic pension costs related to the Company's frozen defined benefit pension plan and post-retirement medical benefit plan were not material for fiscal 2018, or prior periods. Prior period results have not been reclassified on the Company's statement of operations due to materiality. Modifications to Share-based Compensation Awards (ASU 2017-09) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-09, Compensation-Stock Compensation Topic 718-Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when changes to the terms and conditions of share-based payment awards must be accounted for as modifications. Entities apply the modification accounting guidance if the value, vesting conditions, or classification of an award changes. The Company has not modified any share-based payment awards. If the Company modifies share-based payment awards in the future, it will apply the provisions of ASU 2017-09. Definition of a Business (ASU 2017-01) At the beginning of fiscal 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 assists entities in determining if acquired assets constitute the acquisition of a business or the acquisition of assets for accounting and reporting purposes. This distinction is important because goodwill can only be recognized in an acquisition of a business. Prior to ASU 2017-01, if revenues were generated immediately before and after a transaction, the acquisition was typically considered a business. Under ASU 2017-01, entities are required to further assess the substance of the processes they acquire. If the Company commences or completes an acquisition in future periods, it will apply the provisions of ASU 2017-01. Statement of Cash Flows (ASU 2016-15) At the beginning of fiscal 2018, the Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230) ("ASU 2016-15"). ASU 2016-15 represents a consensus of the FASB’s Emerging Issues Task Force on eight separate issues that, if present, can impact classifications on the statement of cash flows. The guidance requires application using a retrospective transition method. The adoption of ASU 2016-15 only impacted the classification of certain insurance proceeds on the Company's consolidated statement of cash flows for fiscal 2018. To Be Adopted After Fiscal 2018 Leases (ASU 2016-02) In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842, which has been codified in ASC 842, Leases ("ASC 842"). Under this new guidance, as a lessee, certain of the Company’s leases under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a right-of-use ("ROU") asset and a lease liability. The Company expects to utilize the related package of practical expedients permitted by the transition guidance in ASU 2016-02, which allows the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its initial direct costs for existing leases. The Company expects to recognize lease liabilities for its operating leases totaling between $800 million and $900 million upon adoption. The initial ROU assets recognized will be equal to the initial operating lease liabilities, adjusted for the balance on adoption date of prepaid and accrued rent, lease incentives and unamortized initial direct costs. The Company currently expects to recognize ROU assets totaling between $650 million and $750 million upon adoption. The Company does not expect adoption of the standard to have a material impact on the Company’s historical capital leases, which will be presented as finance leases under ASU 2016-02. Additionally, the Company does not believe adoption of this standard will have a material effect on the Company's consolidated results of operations or cash flows. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02) In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"). ASU 2018-02 permits a company to reclassify the income tax effects of the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") on items within accumulated other comprehensive income or loss ("AOCI-L") to retained earnings. Because most items that are charged to AOCI-L are recorded net of applicable income taxes, the subsequent reclassification of these items from AOCI-L to the statement of operations will be at different income tax rates due to the 2017 Tax Act, thereby leaving a "stranded" tax balance within AOCI-L. ASU 2018-02 will allow a company to transfer these "stranded" amounts from AOCI-L to retained earnings. ASU 2018-02 will be effective for the Company at the beginning of fiscal 2019, with early adoption permitted. The Company has amounts in its AOCI-L for defined benefit retirement plans that were recorded net of applicable income taxes, thus the Company anticipates the transfer of "stranded" tax amounts from its AOCI-L to retained earnings upon the adoption of ASU 2018-02. The believes the effect of the adoption of ASU 2018-02 will not be material to the Company's financial position. Further, the Company does not believe the adoption will have an effect on the Company's consolidated results of operations or cash flows. Credit Losses (ASU 2016-13) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, an entity will recognize a loss (or allowance) upon initial recognition of the asset that reflects all future events that will lead to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. ASU 2016-13 is effective for public companies for fiscal years beginning after December 15, 2019 with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods therein. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable. Goodwill Impairment Testing (ASU 2017-04) In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, ASU 2017-04 will be applied prospectively. Adoption for public companies is effective for annual and interim impairment tests performed in periods after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption. |
REVENUE RECOGNITION (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASC 606 Initial Application | The effects of retrospective adoption on the Company's consolidated Statements of Operations were as follows:
The cumulative effect to the Company’s retained earnings at January 2, 2016 was an after-tax increase of approximately $0.6 million. The effects of adoption of ASC 606 on the Company’s consolidated balance sheet at December 30, 2017 were as follows:
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Disaggregation of Revenue | Disaggregation of Revenue The Company sells its products directly to consumers ("direct-to-consumer") and to other retail companies and partners that subsequently sell the products directly to their own retail customers. The Company also earns royalties from its licensees. Disaggregated revenues from these sources for fiscal years 2018, 2017, and 2016 were as follows:
Accounts Receivable from Customers and Licensees The components of Accounts receivable, net, were as follows:
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Contract Liabilities | Contract Assets and Liabilities The Company's contract assets are not material. Contract Liabilities The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:
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PROPERTY, PLANT, AND EQUIPMENT (Tables) |
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Property, plant, and equipment | Property, plant, and equipment, net consists of the following:
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | The estimated amortization expense for the next five fiscal years is as follows:
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Intangible assets table | The following table summarizes the Company’s goodwill and other intangible assets at the end of the fiscal year:
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ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (Tables) |
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Schedule of accumulated other comprehensive (loss) income | Accumulated other comprehensive (loss) income is summarized as follows:
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LONG-TERM DEBT (Tables) |
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Schedule of long-term debt | Long-term debt consisted of the following:
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Schedule of redemption price applicable where redemption occurs | The redemption price is applicable when the redemption occurs during the twelve-month period beginning on August 15 of each of the years indicated is as follows:
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COMMON STOCK (Tables) |
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Open Market Repurchases | Open-market repurchases of our common stock during fiscal years 2018, 2017 and 2016 were as follows:
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STOCK-BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of recorded stock-based compensation cost | The Company recorded stock-based compensation cost as follows:
The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period. During fiscal 2018, the Company revised the estimated achievement of performance targets related to certain performance-based grants resulting in a $3.9 million reduction to stock compensation expense. |
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Summary of stock option activity | Changes in the Company's stock options for the fiscal year ended December 29, 2018 were as follows:
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Assumptions used for grants and summary of stock options and restricted stock activity | The table below presents the weighted-average assumptions used to calculate the fair value of options granted in each of the respective fiscal years:
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Summary of restricted stock award activity | The following table summarizes activity related to all restricted stock awards during the fiscal year ended December 29, 2018:
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Summary of issued shares of common stock to non-management board members |
During fiscal years 2018, 2017, and 2016, such awards were as follows:
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EMPLOYEE BENEFIT PLANS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of changes in the projected pension benefit obligation and plan assets | A reconciliation of changes in the projected pension benefit obligation and plan assets is as follows:
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Components of post retirement benefit expense and pension expense | The components of net periodic post-retirement cost (benefit) recognized in the statement of operations and changes recognized in other comprehensive income were as follows:
The components of net periodic pension cost recognized in the statement of operations and changes recognized in other comprehensive income were as follows:
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Schedule of assumptions used in actuarial computations | The actuarial computations utilized the following assumptions, using year-end measurement dates:
The actuarial computations utilized the following assumptions, using year-end measurement dates:
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Expected benefit payments for defined benefit pension plans for the next ten fiscal years | The Company currently expects benefit payments for its defined benefit pension plans as follows for the next ten fiscal years:
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Fair value of the Company's pension plan assets by category | The fair value of the Company's pension plan assets at December 29, 2018 and December 30, 2017, by asset category, were as follows:
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Reconciliation of accumulated post retirement benefit obligation | The following is a reconciliation of the accumulated post-retirement benefit obligation ("APBO") under this plan:
|
INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | The provision for income taxes consisted of the following:
The components of income before income taxes were as follows:
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Federal statutory tax rate reconciliation | The difference between the Company's effective income tax rate and the federal statutory tax rate is reconciled below:
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Components of deferred tax assets and liabilities | The following table reflects the Company’s calculation of the components of deferred assets and liabilities as of December 29, 2018 and December 30, 2017. Certain previously reported amounts as of December 30, 2017 were revised in the table below. The revisions were not material to the previously issued financial statements.
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Net deferred tax liability |
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Unrecognized tax benefits | The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
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EARNINGS PER SHARE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding | The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:
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SEGMENT INFORMATION (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information | The table below presents certain segment information for the periods indicated
(7)Includes the following charges for fiscal 2017 and fiscal 2016:
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Inventory, net, by segment | The table below represents inventory by segment:
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Consolidated Net Sales by Product | The table below represents consolidated net sales by product:
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Property, plant, and equipment, net, by geographic area | The following represents property, plant, and equipment, net, by geographic area:
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OTHER CURRENT AND LONG-TERM LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other current liabilities | Other current liabilities that exceeded five percent of total current liabilities (at the end of either fiscal year) consisted of the following:
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Schedule of other long-term liabilities | Other long-term liabilities that exceeded five percent of total liabilities (at the end of either fiscal year) consisted of the following:
|
LEASE COMMITMENTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Minimum annual rental commitments under current operating leases | Minimum annual rental commitments under current non-cancellable operating leases, as of December 29, 2018, substantially all of which relate to leased real estate, were as follows:
|
VALUATION AND QUALIFYING ACCOUNTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable reserves | Information regarding accounts receivable is as follows:
|
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited summarized financial data | The unaudited summarized financial data by quarter for the fiscal years ended December 29, 2018 and December 30, 2017 is presented in the table below:
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GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Balance Sheets |
CARTER’S, INC. Condensed Consolidating Balance Sheet As of December 30, 2017 (dollars in thousands)
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Condensed Consolidating Statements of Operations and Comprehensive Income |
For the fiscal year ended December 30, 2017 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Statement of Operations For the fiscal year ended December 31, 2016 (dollars in thousands)
For the fiscal year ended December 30, 2017 (dollars in thousands)
For the fiscal year ended December 31, 2016 (dollars in thousands)
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Condensed Consolidating Statements of Cash Flows |
CARTER’S, INC. Condensed Consolidating Statement of Cash Flows For the fiscal year ended December 30, 2017 (dollars in thousands)
CARTER’S, INC. Condensed Consolidating Statement of Cash Flows For the fiscal year ended December 31, 2016 (dollars in thousands)
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Revenue Recognition) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Accounting Policies [Abstract] | |||
Cooperative advertising arrangements, fair value | $ 3.0 | $ 3.1 | $ 3.7 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Accounting for Shipping and Handling Fees and Costs) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Accounting Policies [Abstract] | |||
Wholesale shipping and handling costs | $ 188.9 | $ 173.5 | $ 153.7 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Supplemental Cash Flow Information) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | |||
Interest paid in cash | $ 33.6 | $ 28.3 | $ 25.4 |
Income taxes paid in cash | 55.9 | 132.9 | 120.6 |
Property, plant and equipment additions | $ 1.9 | $ 1.9 | $ 2.6 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Recent Accounting Pronouncements) (Details) - USD ($) $ in Thousands |
Mar. 30, 2019 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Jan. 03, 2016 |
---|---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Retained earnings | $ 909,816 | $ 886,037 | ||
ASC 606 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Retained earnings | $ 886,037 | $ 600 | ||
ASC 842 | Forecast [Member] | Minimum [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Lease liability | $ 800,000 | |||
Right-of use asset | 650,000 | |||
ASC 842 | Forecast [Member] | Maximum [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Lease liability | 900,000 | |||
Right-of use asset | $ 750,000 |
REVENUE RECOGNITION Change in Contract with Customer, Asset and Liability (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Gift Card Liability, Current | $ 14,471 | $ 11,945 |
Contract with Customer, Refund Liability, Current | 7,764 | 7,355 |
Contract with Customer, Liability, Current | $ 22,235 | $ 19,300 |
BUSINESS ACQUISITIONS (Skip Hop Acquisition) (Details) - USD ($) $ in Thousands |
10 Months Ended | ||
---|---|---|---|
Dec. 30, 2017 |
Dec. 29, 2018 |
Feb. 23, 2017 |
|
Business Acquisition [Line Items] | |||
Goodwill | $ 230,424 | $ 227,101 | |
Skip Hop [Member] | |||
Business Acquisition [Line Items] | |||
Percentage of voting interests acquired | 100.00% | ||
Payments to Acquire Businesses, Net of Cash Acquired | 142,500 | ||
Less cash acquired at acquisition | (800) | ||
Goodwill | 46,000 | ||
Intangible Assets | 104,100 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets | 53,900 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities | 20,800 | ||
Deferred income tax liabilities | $ (36,300) |
BUSINESS ACQUISITIONS (Acquisition of Mexican Licensee) (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Business Acquisition [Line Items] | ||
Goodwill | $ 227,101 | $ 230,424 |
Mexican Licensee [Member] | ||
Business Acquisition [Line Items] | ||
Inventory | 8,000 | 8,300 |
Intangible Assets | 3,500 | 3,500 |
Goodwill | $ 6,300 | $ 6,200 |
PROPERTY, PLANT, AND EQUIPMENT (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||
Depreciation, Depletion and Amortization, Nonproduction | $ 85,900 | $ 81,800 | $ 71,500 |
Property, plant and equipment, gross | 799,335 | 782,097 | |
Accumulated depreciation and amortization | (448,898) | (404,173) | |
Property, plant, and equipment, net | 350,437 | 377,924 | |
Fixtures, Equipment, and Computers [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 425,686 | 430,156 | |
Land, Buildings, and Improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 348,131 | 336,981 | |
Marketing Fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 7,001 | 7,602 | |
Construction in Progress [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 18,517 | $ 7,358 |
LONG-TERM DEBT (Schedule of Long Term Debt) (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt, BS | $ 593,264 | $ 617,306 |
Senior notes | ||
Debt Instrument [Line Items] | ||
Long-term debt, BS | $ 400,000 |
COMMON STOCK (Share Repurchases) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Feb. 24, 2016 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
Jan. 02, 2016 |
|
Accelerated Share Repurchases [Line Items] | |||||
Stock repurchase, additional authorized amount | $ 500,000 | $ 462,500 | |||
Stock repurchase, authorized amount | $ 1,460,000 | ||||
Remaining capacity under authorization | $ 392,600 | ||||
Stock Repurchased, shares | 1,879,529 | 2,103,401 | 3,049,381 | ||
Average price of repurchased and retired shares | $ 102.70 | $ 89.74 | $ 98.53 | ||
Stock Repurchased During Period, Value | $ 193,028 | $ 188,762 | $ 300,445 | $ 387,600 |
COMMON STOCK (Dividends) (Details) - $ / shares |
3 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Feb. 14, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Apr. 01, 2017 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Subsequent Event [Line Items] | |||||||||
Dividend declared and paid per common share | $ 0.45 | $ 0.45 | $ 0.45 | $ 0.45 | $ 0.37 | $ 1.80 | $ 1.48 | $ 1.32 | |
Subsequent Event [Member] | |||||||||
Subsequent Event [Line Items] | |||||||||
Dividend declared and paid per common share | $ 0.5 |
STOCK-BASED COMPENSATION (Weighted-Average Assumptions) (Details) - Stock options - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected Volatility | 22.93% | 26.20% | 26.95% |
Risk-free interest rate | 2.75% | 2.06% | 1.33% |
Expected term (years) | 6 years | 6 years | 6 years |
Dividend yield | 1.47% | 1.77% | 1.45% |
Weighted average fair value of options granted | $ 27.36 | $ 19.57 | $ 21.41 |
STOCK-BASED COMPENSATION (Non-Management Board Directors) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Fair value per share | $ 118.03 | ||
Aggregate value | $ 1,171 | $ 1,185 | |
Director [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares issued | 10,971 | 13,860 | 12,758 |
Fair value per share | $ 109.67 | $ 84.46 | $ 101.10 |
Aggregate value | $ 1,203 | $ 1,290 |
EMPLOYEE BENEFIT PLANS (Assumptions) (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Net periodic pension cost | |||
Expected long-term rate of return on assets | 5.50% | ||
Pension Plans | |||
Benefit obligation | |||
Discount rate | 4.00% | 3.50% | |
Net periodic pension cost | |||
Discount rate | 3.50% | 4.00% | 4.25% |
Expected long-term rate of return on assets | 6.25% | 6.00% | 6.00% |
Postretirement Benefit | |||
Benefit obligation | |||
Discount rate | 4.00% | 3.25% | |
Net periodic pension cost | |||
Discount rate | 3.25% | 3.50% | 3.75% |
EMPLOYEE BENEFIT PLANS (Expected Benefit Payments) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Contribution | $ 300 | $ 300 | $ 400 |
Pension Plans | |||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Defined Benefit Plan, Expected Future Employer Contributions, Current Fiscal Year | 6,000 | ||
Contribution | 6,000 | $ 0 | |
2019 | 3,020 | ||
2020 | 2,600 | ||
2021 | 2,660 | ||
2022 | 2,860 | ||
2023 | 2,940 | ||
2024 and thereafter | 17,850 | ||
Postretirement Benefit | |||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Defined Benefit Plan, Expected Future Employer Contributions, Current Fiscal Year | 300 | ||
2019 | 300 | ||
2020 | 300 | ||
2021 | 300 | ||
2022 | 300 | ||
2024 and thereafter | $ 1,100 |
EMPLOYEE BENEFIT PLANS (Defined Contribution Plans) (Details) - Defined Contribution Plan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
United States | |||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | |||
Minimum age participation for the defined contribution plan (in years) | 21 years | ||
Minimum service participation for the defined contribution plan (in months) | 1 month | ||
Minimum hours service participation for the defined contribution plan (in hours) | 1000 hours | ||
Defined contribution plan expense for the fiscal year | $ 8.0 | $ 13.9 | $ 10.5 |
Canada | |||
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | |||
Defined contribution plan expense for the fiscal year | $ 0.1 | $ 0.3 |
INCOME TAXES (Narrative) (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 30, 2017 |
Dec. 29, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Provisional income tax benefit | $ 40.0 | |
Unrecognized deferred tax liability related to undistributed earnings | $ 2.0 | |
Foreign earnings | 10.4 | |
Remeasurement of certain deferred income tax | $ 50.4 |
INCOME TAXES (Provision for Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Undistributed Earnings of Foreign Subsidiaries | $ 82,000 | ||
Current tax provision: | |||
Federal | 48,129 | $ 117,676 | $ 113,326 |
State | 9,437 | 11,368 | 11,407 |
Foreign | 17,359 | 14,116 | 11,937 |
Total current provision | 74,925 | 143,160 | 136,670 |
Deferred tax provision (benefit): | |||
Federal | (760) | (55,191) | 1,215 |
State | 140 | 337 | 332 |
Foreign | (398) | (82) | (486) |
Total deferred provision (benefit) | (1,018) | (54,936) | 1,061 |
Total provision | $ 73,907 | 88,224 | $ 137,731 |
Foreign earnings | $ 10,400 |
INCOME TAXES (Income Before Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ 260,722 | $ 325,620 | $ 344,674 |
Foreign | 95,253 | 65,452 | 50,766 |
Total | $ 355,975 | $ 391,072 | $ 395,440 |
INCOME TAXES (Effective Rate Reconciliation) (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Income tax rate reconciliation [Abstract] | |||
Statutory federal income tax rate | 21.00% | 35.00% | 35.00% |
State income taxes, net of federal income tax benefit | 2.80% | 2.10% | 2.30% |
Impact of foreign operations | (1.50%) | (2.70%) | (2.10%) |
Settlement of uncertain tax positions | (0.40%) | (0.30%) | (0.40%) |
Benefit from stock-based compensation | (1.10%) | (1.30%) | (0.00%) |
Imposition of transition tax on foreign subsidiaries | 0.00% | 2.70% | 0.00% |
Revaluation of deferred taxes | 0.00% | (12.90%) | 0.00% |
Total | 20.80% | 22.60% | 34.80% |
INCOME TAXES (Deferred Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 30, 2017 |
Dec. 29, 2018 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Remeasurement of certain deferred income tax | $ 50,400 | |
Current net deferred tax asset | 1,941 | $ 2,083 |
Non-current net deferred tax liability | (84,944) | (87,347) |
Deferred tax assets: | ||
Accounts receivable allowance | 3,632 | 3,674 |
Inventory | 6,759 | 7,785 |
Accrued liabilities | 13,174 | 10,672 |
Equity-based compensation | 6,796 | 5,278 |
Deferred employee benefits | 8,112 | 6,425 |
Deferred rent | 34,422 | 33,761 |
Other | 2,335 | 3,007 |
Total deferred tax assets | 75,230 | 70,602 |
Deferred tax liabilities: | ||
Depreciation | (63,763) | (62,898) |
Tradename and licensing agreements | (89,142) | (89,194) |
Other | (5,328) | (3,774) |
Total deferred tax liabilities | 158,233 | 155,866 |
Net deferred tax asset (liability) | $ (83,003) | $ (85,264) |
INCOME TAXES (Uncertain Tax Provisions) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Unrecognized income tax benefits [Roll Forward] | |||
Beginning Balance | $ 12,193 | $ 10,537 | $ 9,415 |
Additions based on fiscal year tax positions | 3,350 | 3,380 | 2,849 |
Reductions for prior year tax positions | (120) | (39) | |
Reductions for lapse of statute of limitations | (1,867) | (1,604) | (995) |
Reductions for prior year tax settlements | (693) | ||
Additions for prior year tax positions | 241 | ||
Ending Balance | 13,917 | 12,193 | $ 10,537 |
Impact of recognized tax benefit on effective tax rate, if recognized | 11,900 | ||
Tax reserve for which statute of limitations is expected to expire | 2,900 | ||
Other Tax Expense (Benefit) | 800 | ||
Interest accrued for uncertain tax positions | $ 1,800 | $ 1,000 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Weighted-average number of common and common equivalent shares outstanding: | |||||||||||
Basic number of common shares outstanding (in shares) | 46,160,935 | 47,593,211 | 49,917,858 | ||||||||
Dilutive effect of unvested restricted stock awards (in shares) | 487,485 | 552,864 | 457,849 | ||||||||
Diluted number of common and common equivalent shares outstanding (in shares) | 46,648,420 | 48,146,075 | 50,375,707 | ||||||||
Basic net income per common share: | |||||||||||
Net income | $ 130,561 | $ 71,770 | $ 37,268 | $ 42,469 | $ 136,144 | $ 82,316 | $ 37,793 | $ 46,595 | $ 282,068 | $ 302,848 | $ 257,709 |
Income allocated to participating securities | (2,148) | (2,407) | (2,046) | ||||||||
Net income available to common shareholders | $ 279,920 | $ 300,441 | $ 255,663 | ||||||||
Basic net income per common share (in dollars per share) | $ 2.85 | $ 1.55 | $ 0.80 | $ 0.90 | $ 2.88 | $ 1.73 | $ 0.78 | $ 0.96 | $ 6.06 | $ 6.31 | $ 5.12 |
Diluted net income per common share: | |||||||||||
Net income | $ 130,561 | $ 71,770 | $ 37,268 | $ 42,469 | $ 136,144 | $ 82,316 | $ 37,793 | $ 46,595 | $ 282,068 | $ 302,848 | $ 257,709 |
Income allocated to participating securities | (2,132) | (2,386) | (2,032) | ||||||||
Net income available to common shareholders | $ 279,936 | $ 300,462 | $ 255,677 | ||||||||
Diluted net income per common share (in dollars per share) | $ 2.83 | $ 1.53 | $ 0.79 | $ 0.89 | $ 2.85 | $ 1.71 | $ 0.77 | $ 0.95 | $ 6.00 | $ 6.24 | $ 5.08 |
Anti-dilutive shares excluded from dilutive earnings per share calculations (1) | 289,839 | 629,944 | 247,460 |
SEGMENT INFORMATION (Net Inventory) (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Finished goods inventories | $ 574,226 | $ 548,722 |
Operating Segments [Member] | Wholesale [Member] | ||
Segment Reporting Information [Line Items] | ||
Finished goods inventories | 414,174 | 389,484 |
Operating Segments [Member] | Retail [Member] | ||
Segment Reporting Information [Line Items] | ||
Finished goods inventories | 96,241 | 93,404 |
Operating Segments [Member] | International | ||
Segment Reporting Information [Line Items] | ||
Finished goods inventories | $ 63,811 | $ 65,834 |
SEGMENT INFORMATION (Net Sales) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Revenue from External Customer [Line Items] | |||||||||||
Net sales | $ 1,086,379 | $ 923,907 | $ 696,197 | $ 755,786 | $ 1,027,880 | $ 948,046 | $ 691,751 | $ 732,827 | $ 3,462,269 | $ 3,400,504 | $ 3,198,543 |
Baby [Member] | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Net sales | 1,239,009 | 1,294,404 | 1,241,452 | ||||||||
Playclothes [Member] | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Net sales | 1,303,610 | 1,239,546 | 1,214,995 | ||||||||
Sleepwear [Member] | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Net sales | 431,961 | 426,703 | 407,078 | ||||||||
Other Products [Member] | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Net sales | $ 487,689 | $ 439,851 | $ 335,018 |
SEGMENT INFORMATION (Revenue) (Details) |
12 Months Ended | |
---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
|
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Percentage of total net sales | 64.20% | 64.90% |
SEGMENT INFORMATION (Long-Lived Assets) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 350,437 | $ 377,924 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | 314,679 | 337,369 |
International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-lived assets | $ 35,758 | $ 40,555 |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
International long-lived assets, as a percent of total long-lived assets | 87.40% | 87.60% |
FAIR VALUE MEASUREMENTS Foreign currency contracts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Marketable Securities | $ 15,700 | $ 16,700 | |
Gain (Loss) on Investments | 1,000 | 100 | |
Foreign Currency Transaction Gain (Loss), Realized | $ 3,200 | ||
Long-term debt, BS | 593,264 | 617,306 | |
Revolving credit facility | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Long-term Debt | 196,000 | 221,000 | |
Senior notes | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Long-term Debt | 397,264 | $ 396,306 | |
Long-term debt, fair value | 399,000 | ||
Long-term debt, BS | $ 400,000 |
OTHER CURRENT AND LONG-TERM LIABILITIES (Other Current Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Accrued bonuses and incentive compensation | $ 8,409 | $ 27,566 |
Accrued employee benefits | 16,421 | 21,735 |
Accrued and deferred rent | 19,120 | 18,213 |
Accrued Income Taxes, Current | $ 17,415 | $ 16,252 |
OTHER CURRENT AND LONG-TERM LIABILITIES (Other Long-Term Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 29, 2018 |
Dec. 30, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Deferred lease incentives | $ 72,345 | $ 75,104 |
LEASE COMMITMENTS (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Leases [Abstract] | |||
Rent expense under operating leases | $ 165,600 | $ 161,900 | $ 150,600 |
2018 | 163,963 | ||
2019 | 150,010 | ||
2020 | 134,203 | ||
2021 | 116,773 | ||
2022 | 102,487 | ||
Thereafter | 235,731 | ||
Total | $ 903,167 | ||
Term of contract | 4 years 10 months 12 days | ||
Commitments under capital leases | $ 1,300 |
VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Accounts receivable reserves [Roll Forward] | |||
Beginning balance | $ 13,736 | $ 8,752 | $ 8,943 |
Additions, charged to expense | 30,280 | 8,204 | 6,088 |
Charges to reserve | (32,150) | (3,220) | (6,279) |
Ending balance | 11,866 | 13,736 | 8,752 |
Accounts receivable reserves [Member] | |||
Accounts receivable reserves [Roll Forward] | |||
Beginning balance | 13,736 | 8,752 | 8,543 |
Additions, charged to expense | 30,280 | 8,204 | 6,088 |
Charges to reserve | (32,150) | (3,220) | (5,879) |
Ending balance | 11,866 | 13,736 | 8,752 |
Sales returns reserve [Member] | |||
Accounts receivable reserves [Roll Forward] | |||
Beginning balance | 0 | 0 | 400 |
Additions, charged to expense | 0 | 0 | 0 |
Charges to reserve | 0 | 0 | (400) |
Ending balance | $ 0 | $ 0 | $ 0 |
UNAUDITED QUARTERLY FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Apr. 02, 2016 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Net sales | $ 1,086,379 | $ 923,907 | $ 696,197 | $ 755,786 | $ 1,027,880 | $ 948,046 | $ 691,751 | $ 732,827 | $ 3,462,269 | $ 3,400,504 | $ 3,198,543 | |
Gross profit | 467,598 | 387,450 | 309,958 | 332,477 | 460,837 | 403,578 | 303,247 | 315,692 | 1,497,483 | 1,483,354 | 1,378,519 | |
Royalty income, net | 1,086,379 | 923,907 | 696,197 | 755,786 | 1,027,880 | 948,046 | 691,751 | 732,827 | 3,462,269 | 3,400,504 | 3,198,543 | |
Selling, general, and administrative expenses | 307,358 | 294,117 | 263,343 | 280,162 | 325,508 | 283,480 | 250,146 | 247,794 | 1,144,980 | 1,106,928 | 995,406 | |
Operating income | 170,597 | 103,557 | 56,970 | 60,309 | 146,392 | 130,448 | 64,311 | 78,456 | 391,433 | 419,607 | 425,928 | |
Net income | $ 130,561 | $ 71,770 | $ 37,268 | $ 42,469 | $ 136,144 | $ 82,316 | $ 37,793 | $ 46,595 | $ 282,068 | $ 302,848 | $ 257,709 | |
Basic net income per common share (in dollars per share) | $ 2.85 | $ 1.55 | $ 0.80 | $ 0.90 | $ 2.88 | $ 1.73 | $ 0.78 | $ 0.96 | $ 6.06 | $ 6.31 | $ 5.12 | |
Diluted net income per common share (in dollars per share) | $ 2.83 | $ 1.53 | $ 0.79 | $ 0.89 | $ 2.85 | $ 1.71 | $ 0.77 | $ 0.95 | $ 6.00 | $ 6.24 | $ 5.08 | |
Provisional income tax benefit | $ 40,000 | |||||||||||
Royalty [Member] | ||||||||||||
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Net sales | $ 10,357 | $ 10,224 | $ 10,355 | $ 7,994 | $ 11,063 | $ 10,350 | $ 11,210 | $ 10,558 | $ 42,815 | $ 38,930 | 43,181 | $ 42,815 |
Royalty income, net | $ 10,357 | $ 10,224 | $ 10,355 | $ 7,994 | $ 11,063 | $ 10,350 | $ 11,210 | $ 10,558 | $ 42,815 | $ 38,930 | $ 43,181 | $ 42,815 |
GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Income Statement) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Apr. 02, 2016 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | $ 1,086,379 | $ 923,907 | $ 696,197 | $ 755,786 | $ 1,027,880 | $ 948,046 | $ 691,751 | $ 732,827 | $ 3,462,269 | $ 3,400,504 | $ 3,198,543 | |
Cost of goods sold | 1,964,786 | 1,917,150 | 1,820,024 | |||||||||
Gross profit | 467,598 | 387,450 | 309,958 | 332,477 | 460,837 | 403,578 | 303,247 | 315,692 | 1,497,483 | 1,483,354 | 1,378,519 | |
Royalty income, net | 1,086,379 | 923,907 | 696,197 | 755,786 | 1,027,880 | 948,046 | 691,751 | 732,827 | 3,462,269 | 3,400,504 | 3,198,543 | |
Selling, general, and administrative expenses | 307,358 | 294,117 | 263,343 | 280,162 | 325,508 | 283,480 | 250,146 | 247,794 | 1,144,980 | 1,106,928 | 995,406 | |
Operating income | 170,597 | 103,557 | 56,970 | 60,309 | 146,392 | 130,448 | 64,311 | 78,456 | 391,433 | 419,607 | 425,928 | |
Interest expense | 34,569 | 30,044 | 27,044 | |||||||||
Interest income | (527) | (345) | (563) | |||||||||
(Income) loss in subsidiaries | 0 | 0 | 0 | |||||||||
Other (income) expense, net | 1,416 | (1,164) | 4,007 | |||||||||
Income before income taxes | 355,975 | 391,072 | 395,440 | |||||||||
Provision for income taxes | 73,907 | 88,224 | 137,731 | |||||||||
Net income | 130,561 | 71,770 | 37,268 | 42,469 | 136,144 | 82,316 | 37,793 | 46,595 | 282,068 | 302,848 | 257,709 | |
Consolidating Adjustments [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | (945,941) | (850,443) | (746,150) | |||||||||
Cost of goods sold | (924,720) | (829,625) | (727,148) | |||||||||
Gross profit | (21,221) | (20,818) | (19,002) | |||||||||
Royalty income, net | (945,941) | (850,443) | (746,150) | |||||||||
Selling, general, and administrative expenses | (35,704) | (37,510) | (37,567) | |||||||||
Operating income | 1,803 | 5,332 | 8,992 | |||||||||
Interest expense | (5,308) | (5,308) | (5,308) | |||||||||
Interest income | 5,308 | 5,308 | 5,308 | |||||||||
(Income) loss in subsidiaries | 392,267 | 367,222 | 282,209 | |||||||||
Other (income) expense, net | 0 | 0 | 0 | |||||||||
Income before income taxes | (390,464) | (361,890) | (273,217) | |||||||||
Provision for income taxes | 0 | 0 | 0 | |||||||||
Net income | (390,464) | (361,890) | (273,217) | |||||||||
Parent [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 0 | 0 | 0 | |||||||||
Cost of goods sold | 0 | 0 | 0 | |||||||||
Gross profit | 0 | 0 | 0 | |||||||||
Royalty income, net | 0 | 0 | 0 | |||||||||
Selling, general, and administrative expenses | 0 | 0 | 0 | |||||||||
Operating income | 0 | 0 | 0 | |||||||||
Interest expense | 0 | 0 | 0 | |||||||||
Interest income | 0 | 0 | 0 | |||||||||
(Income) loss in subsidiaries | (282,068) | (302,848) | (257,709) | |||||||||
Other (income) expense, net | 0 | 0 | 0 | |||||||||
Income before income taxes | 282,068 | 302,848 | 257,709 | |||||||||
Provision for income taxes | 0 | 0 | 0 | |||||||||
Net income | 282,068 | 302,848 | 257,709 | |||||||||
Subsidiary Issuer [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 1,936,576 | 1,922,930 | 1,881,918 | |||||||||
Cost of goods sold | 1,458,934 | 1,406,517 | 1,358,209 | |||||||||
Gross profit | 477,642 | 516,413 | 523,709 | |||||||||
Royalty income, net | 1,936,576 | 1,922,930 | 1,881,918 | |||||||||
Selling, general, and administrative expenses | 191,068 | 181,129 | 177,605 | |||||||||
Operating income | 319,532 | 370,100 | 378,832 | |||||||||
Interest expense | 34,523 | 29,758 | 26,475 | |||||||||
Interest income | (5,329) | (5,497) | (5,756) | |||||||||
(Income) loss in subsidiaries | (38,528) | (25,426) | 4,808 | |||||||||
Other (income) expense, net | 495 | (1,154) | (382) | |||||||||
Income before income taxes | 328,371 | 372,419 | 353,687 | |||||||||
Provision for income taxes | 48,106 | 74,903 | 104,970 | |||||||||
Net income | 280,265 | 297,516 | 248,717 | |||||||||
Guarantor Subsidiaries [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 2,039,889 | 1,955,703 | 1,762,252 | |||||||||
Cost of goods sold | 1,217,110 | 1,143,867 | 1,033,403 | |||||||||
Gross profit | 822,779 | 811,836 | 728,849 | |||||||||
Royalty income, net | 2,039,889 | 1,955,703 | 1,762,252 | |||||||||
Selling, general, and administrative expenses | 856,665 | 837,252 | 753,874 | |||||||||
Operating income | (15,234) | (5,691) | (5,365) | |||||||||
Interest expense | 5,310 | 5,498 | 5,435 | |||||||||
Interest income | (2) | 0 | 0 | |||||||||
(Income) loss in subsidiaries | (71,671) | (38,948) | (29,308) | |||||||||
Other (income) expense, net | (189) | 1,281 | 482 | |||||||||
Income before income taxes | 51,318 | 26,478 | 18,026 | |||||||||
Provision for income taxes | 12,790 | 1,052 | 22,834 | |||||||||
Net income | 38,528 | 25,426 | (4,808) | |||||||||
Non-Guarantors Subsidiaries [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 431,745 | 372,314 | 300,523 | |||||||||
Cost of goods sold | 213,462 | 196,391 | 155,560 | |||||||||
Gross profit | 218,283 | 175,923 | 144,963 | |||||||||
Royalty income, net | 431,745 | 372,314 | 300,523 | |||||||||
Selling, general, and administrative expenses | 132,951 | 126,057 | 101,494 | |||||||||
Operating income | 85,332 | 49,866 | 43,469 | |||||||||
Interest expense | 44 | 96 | 442 | |||||||||
Interest income | (504) | (156) | (115) | |||||||||
(Income) loss in subsidiaries | 0 | 0 | 0 | |||||||||
Other (income) expense, net | 1,110 | (1,291) | 3,907 | |||||||||
Income before income taxes | 84,682 | 51,217 | 39,235 | |||||||||
Provision for income taxes | 13,011 | 12,269 | 9,927 | |||||||||
Net income | 71,671 | 38,948 | 29,308 | |||||||||
Royalty [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 10,357 | 10,224 | 10,355 | 7,994 | 11,063 | 10,350 | 11,210 | 10,558 | $ 42,815 | 38,930 | 43,181 | 42,815 |
Royalty income, net | $ 10,357 | $ 10,224 | $ 10,355 | $ 7,994 | $ 11,063 | $ 10,350 | $ 11,210 | $ 10,558 | 42,815 | 38,930 | 43,181 | $ 42,815 |
Royalty [Member] | Consolidating Adjustments [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | (9,573) | (12,680) | (11,360) | |||||||||
Royalty income, net | (9,573) | (12,680) | (11,360) | |||||||||
Royalty [Member] | Parent [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 0 | 0 | 0 | |||||||||
Royalty income, net | 0 | 0 | 0 | |||||||||
Royalty [Member] | Subsidiary Issuer [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 32,728 | 32,958 | 34,816 | |||||||||
Royalty income, net | 32,728 | 32,958 | 34,816 | |||||||||
Royalty [Member] | Guarantor Subsidiaries [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 19,660 | 18,652 | 19,725 | |||||||||
Royalty income, net | 19,660 | 18,652 | 19,725 | |||||||||
Royalty [Member] | Non-Guarantors Subsidiaries [Member] | ||||||||||||
Condensed Income Statements, Captions [Line Items] | ||||||||||||
Net sales | 0 | 0 | 0 | |||||||||
Royalty income, net | $ 0 | $ 0 | $ 0 |
GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Comprehensive Income) (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 29, 2018 |
Sep. 29, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 30, 2017 |
Sep. 30, 2017 |
Jul. 01, 2017 |
Apr. 01, 2017 |
Dec. 29, 2018 |
Dec. 30, 2017 |
Dec. 31, 2016 |
|
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | $ 130,561,000 | $ 71,770,000 | $ 37,268,000 | $ 42,469,000 | $ 136,144,000 | $ 82,316,000 | $ 37,793,000 | $ 46,595,000 | $ 282,068,000 | $ 302,848,000 | $ 257,709,000 |
Post-retirement benefit plans | (67,000) | (692,000) | (335,000) | ||||||||
Foreign currency translation adjustments | (11,679,000) | 6,339,000 | 1,962,000 | ||||||||
Comprehensive income | 270,322,000 | 308,495,000 | 259,336,000 | ||||||||
Consolidating Adjustments [Member] | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | (390,464,000) | (361,890,000) | (273,217,000) | ||||||||
Post-retirement benefit plans | 349,000 | 1,122,000 | 1,001,000 | ||||||||
Foreign currency translation adjustments | 35,037,000 | (19,017,000) | (5,886,000) | ||||||||
Comprehensive income | (355,078,000) | (379,785,000) | (278,102,000) | ||||||||
Parent [Member] | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | 282,068,000 | 302,848,000 | 257,709,000 | ||||||||
Post-retirement benefit plans | (67,000) | (692,000) | (335,000) | ||||||||
Foreign currency translation adjustments | (11,679,000) | 6,339,000 | 1,962,000 | ||||||||
Comprehensive income | 270,322,000 | 308,495,000 | 259,336,000 | ||||||||
Subsidiary Issuer [Member] | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | 280,265,000 | 297,516,000 | 248,717,000 | ||||||||
Post-retirement benefit plans | (67,000) | (692,000) | (335,000) | ||||||||
Foreign currency translation adjustments | (11,679,000) | 6,339,000 | 1,962,000 | ||||||||
Comprehensive income | 268,519,000 | 303,163,000 | 250,344,000 | ||||||||
Guarantor Subsidiaries [Member] | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | 38,528,000 | 25,426,000 | (4,808,000) | ||||||||
Post-retirement benefit plans | (282,000) | (430,000) | (666,000) | ||||||||
Foreign currency translation adjustments | (11,679,000) | 6,339,000 | 1,962,000 | ||||||||
Comprehensive income | 26,567,000 | 31,335,000 | (3,512,000) | ||||||||
Non-Guarantors Subsidiaries [Member] | |||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||
Net income | 71,671,000 | 38,948,000 | 29,308,000 | ||||||||
Post-retirement benefit plans | 0 | 0 | 0 | ||||||||
Foreign currency translation adjustments | (11,679,000) | 6,339,000 | 1,962,000 | ||||||||
Comprehensive income | $ 59,992,000 | $ 45,287,000 | $ 31,270,000 |
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